2023 Investor Day live from the New York Stock Exchange. I'm Renee Campbell, Senior Vice President of Investor Relations and Treasurer. On behalf of the entire Valmont management team, I'd like to thank everyone for joining us this morning, and we look forward to spending the next few hours with you. Special thank you to those of you who traveled to be with us here in person. It's really nice to see everybody. Before we begin, a reminder that today's presentation is subject to our disclosure on forward-looking statements which can be found on the slide in front of you. Please take a moment to review. Okay. Turning to the agenda, we have an exciting day planned for you today.
First, you'll hear from our President and Chief Executive Officer, Stephen G. Kaniewski, who will share how we are building on a strong foundation of outperformance, innovation, and operational excellence that uniquely positions us to accelerate growth across our businesses and serve the expanding global markets of infrastructure and agriculture. Stephen G. Kaniewski will introduce our new strategic framework called Run, Grow, Transform, which will serve as our guide as we deliver greater value to our customers through new products and services, digital innovation and technology as we evolve into being a less cyclical company with more resilient high-value revenue.
Stephen G. Kaniewski will also introduce our new five years financial growth targets. Next, you'll hear from four members of our senior leadership team, starting with Jason Hixson, President of Global Irrigation, Daniel Kappelman, President of Ag Technology, Aaron Schapper, Group President of Infrastructure, and Diane Larkin, Executive Vice President of Global Operations. Each of them will share the ways that they are driving growth and transformation across their businesses through market expansion and new products, as well as strategic investments that support capacity growth.
They'll also share how we are differentiating ourselves in our markets with a focus on disruption, technology, and innovation while furthering our ESG initiatives through our products and solutions, all in support of our long-standing tagline, "Conserving Resources. Improving Life." Finally, you'll hear from our Chief Financial Officer, Avner Applbaum, who will share his vision to accelerate Run/Grow/Transform with a disciplined financial framework building on our strong track record of historical performance and balanced capital allocation strategy. Avner will talk about how we aim to deliver a higher quality of earnings through a more resilient business that supports achieving our five year financial targets.
We'll finish today's formal agenda with a few closing remarks from Steve. Just a couple of notes about logistics. First, I would ask that all of you in the room, please mute your phones and your notifications. We are webcasting live, and the presentation can be found on our investors page at valmont.com. Steve is going to kick us off, followed by Josh and Daniel, and then we'll do about a 30 minutes Q&A primarily focused on the topics from the first half of this morning. We're gonna take a quick break, come back, and you'll hear from Aaron, Diane, and Avner, followed by a second Q&A session. We'll have microphones that we can pass around for those of you that are here in the audience to ask a question.
If you're joining us virtually, there is an Ask a Question tab in the upper right corner of the video player that you can use to submit a question, and we'll try to get to as many of those as possible this morning that come in online. Before we begin, I'd like to share a brief video that I feel captures the essence of how Valmont is improving lives around the world, both today and into the future. You're going to see the many ways that we're adapting technology to solve real-world problems by advancing agricultural productivity and providing vital infrastructure. Keep in mind this is only the start. The opportunities that lie ahead for Valmont and our stakeholders are nearly endless.
At Valmont, we take the promise of technology and make it useful in everyday life. With solar trackers that maximize the generation of renewable energy. With utility structures that accelerate the energy transition by helping to balance the system, reducing outages, delivering reliable energy, working greater distances. With aerial inspections that monitor critical structures to keep them running safely and reliably. In short, we make the infrastructure for a better tomorrow. A tomorrow where reliable and sustainable energy will power innovation that improves lives for all.
Valmont also makes the infrastructure that supports and enables reliable wireless connectivity, like the telecom towers and antenna support systems that monitor traffic flow and enable cars to drive themselves, but more importantly, connect us to each other no matter where we are. It's infrastructure that will support and grow with ever-changing technology today and far into the future. A future where our connected structures will help you go places faster and safer in ways you never imagined. Valmont also helps advance agricultural productivity with in-field infrastructure that enables breakthrough technology. Technology that helps growers plan better and produce more with less, helping them do what they do best: feed more people more sustainably than ever before.
As the population grows and the technology advances, our capacity to put food within easy reach increases.
All of this is vital infrastructure that will make the world better in the future, starting today. That's the value we add.
I'd now like to introduce our President and Chief Executive Officer, Steve Kaniewski.
Okay. Thank you very much, Renee. I'm excited to be here this morning. It's good to see a lot of familiar faces, as well as some new faces, to the Valmont story. I'm really excited for our team, who has worked tirelessly to put together this investor day, for everyone here, as well as on the web. This is a culmination really of what we do and how we do it, and where we're taking the company and the strategies that will be behind it. Just for a quick reference, Steve Kaniewski, President and CEO. I started out in Valmont as our IT leader, as the CIO. I then went in and ran the operations in our irrigation at the time segment, then moved into our utility segment to run that, moved up, to be COO, and then CEO since 2018.
Really proud of what we've been able to accomplish, and there's some key takeaways that I'd like you to take away from today's presentations. First, we've built a really solid, enduring business that has a strong foundation, that's been able to outperform through volatility, through cycles, and through just recently inflation and other kinds of macroeconomic shocks that have taken place. It's this team right here that's been able to do that. I also wanna introduce our Run, Grow, Transform framework and tell you a little bit about that, what that means and how it will be deployed throughout the company. We're also gonna show you how we leverage technology and digitization. How does that translate not just into how do we run better, which it for sure will do, but also how we can generate revenue coming from these types of digital efforts.
We will show that we will continue to embed ESG and sustainability into everything that we do. It is our tagline, "Conserving Resources. Improving Life.," therefore it's just something that we find to be very natural for us, and ultimately it's a way to be more productive. Lastly, we'll show you that we're gonna deliver reliable growth while expanding our operating margins, and more importantly our return on invested capital, which we still believe is the number one proxy for shareholder value. A little bit about Valmont. As of the end of 2022, we hit $4.3 billion in sales. As of just a couple days ago, we were a $6 billion market cap. We operate in over 100 countries. We have 84 manufacturing locations and 11,000 employees.
That's just a statistic, but what it should show you is that we have global presence. We're able to take our products and our services through our channels everywhere around the world that will allow us that the U.S. State Department will allow us to do. Really other than three countries, there's not a country or an operation that we're afraid to go into as long as we can provide leverage by going into those areas. Something new on this chart that you'll see too is our technology innovation centers. There's four of them. This is also a sign that we're changing the way we go about doing our work, creating our products and services, and frankly something we're looking really forward to. There we go. Okay.
I wanna take a moment to kind of play back since 2018 where we were and to where we're going. In 2018 we still were operating in 4 segments. We were still a little more siloed in orientation than we are today. As a result, oftentimes our resources and our capital were concentrated in those silos. We were just at the early stages of really figuring out what this thing called ESG was. We had moved some operations over to be centralized, so I had started that in the utility segment where we could operate all of our factories centrally. Ultimately we know that we get better capital utilization, better resource allocation when we can take things and put them together.
Obviously our steel purchasing and other raw material purchasing, it truly makes sense to do that, so we embarked on that journey. I will say as of last year, we now are down to two operating segments because we look at strategy in agriculture and Infrastructure really as together. The technology offerings that you see in Infrastructure carry across all the product lines. The way we produce carries across all the product lines. The resource allocation of our best and brightest is done by those two segments. What it allowed us to do was to take away operations from the commercial organizations to allow the commercial organizations to focus, to focus on new products, new services, research and development, and to just go after that with a complete focus on moving to value-added pricing. In 2018, I'd say we were still a little more cost-plus.
Over time, we've quickly moved into value-based pricing. What do we do for our customers that our competitors don't do? What else can we do from a capabilities perspective that our competitors can't do? Let's make sure we're charging an appropriate amount. In hindsight, and hindsight always being 20/20, thank God we did, because then COVID hit. Supply chains were way out of whack. We had hyperinflation on steel and other metals. At the beginning of last year, we couldn't get labor. The fact is, our ability to handle that volatility was because of our organization. It helped us through it. It helped us make money and to continue to grow about $2 billion over 3 years during that same time period. An incredible feat by the team and one that really the organizational structure allowed us to do.
Where we're going in the future is that we're gonna be able to take this organization and that relentless focus on value-based pricing and new product orientation to really excel our revenue and return on invested capital coming from much higher margin types of products and services. I'm looking forward to sharing more about that. Okay. We have a differentiated business model. Many people say they have a differentiated business model. What is ours? Ours is really five main focus areas resting on our four core values as a company that have been in the company since its inception. We talk about sustainability, allocating capital towards growth, as opposed to just running the business. We are going into technology niches where our channel and our ability to access that market is unique and also puts us in a position to help the customer overcome issues.
As an example, when we bought Prospera, we bought it because the excuse me, agronomy niche within the agricultural tech area was not really being paid attention to. Most people were paying attention to planting, harvesting. Yes, they could give images, but how many images could you get? How often could you get them? Was the science behind it really unique and value-adding? What you'll hear from Daniel later today is that we are now doing things on that big middle piece called during the growing season that no one else can do. We've built a dataset that is by far superior and larger than any dataset that exists in the world. We're bringing the science of machine learning to it so that we can point out issues that nobody else can see. Over time, we will also work on ways to remediate that.
This doesn't just mean under our pivot, right? This is what we talk about as far as a differentiated niche. It's we are known on the farm by every grower. We're trusted because we've been in for 78 years. They understand we have 700 plus dealers around the world. We will be there to help them through that technology shift. It brings credibility to the technology sale. You could be a startup and not have a channel, or it'll be inordinately expensive to do so. Our core values is what I said shapes everything that we do. First off, passion, and I think you will see that today in the team that is presenting. We have a passion for what we do, is to feed the world and to make the world a better place. Integrity.
We operate way above board, how we treat not just ourselves, but our customers, our shareholders, our stakeholders, the communities that we live in. Continuous improvement is embedded into our DNA. Over time, that has become to be more synonymous with lean or lean manufacturing, but it's in every area that we work in. How can we get better? Ultimately, delivering results, which is what many of you are here to hear about, is what has to come out of all of that. We have a delivering results mindset. Okay. Let's talk a little bit about the markets we are in. We are based in agriculture and infrastructure. These are markets that tend to run very different than the general economy. They have different degrees of stimulus around the world, and they have multi factors as to what drives demand. Okay. Why us in these markets?
We've become the biggest in the markets that we serve because we have an unmatched ability to go anywhere in the world to pursue opportunities. Not just as an exporter, not just going from a central supply chain perspective, but these are markets where local for local is often valued and/or required. That flexible global footprint is what brings that into focus for us. We also are able to, as we become more global and across these markets, I think you'll hear throughout the day, we're really working on reducing cyclicality.
Even if you take an example of a cycle down in one nation, it could be the same exact product in a different nation that is moving up. Brazil comes to mind in agriculture as an area with explosive growth and nothing really in the way of that growth because of just the ability to convert land, to move quicker to technology, and because they have two or three grow seasons, they can do this all much faster than as a place here in the U.S. Little trouble with this there. Okay. First off, we're in these niche markets, these different markets with different drivers, and the markets are good. Right? When you think about the portfolio growth that we are experiencing, broad-based in the product lines we serve, is kind of an enviable position to be in right now.
As we know, agriculture has seen a sharp spike over the last two years, much of it coming from the Russia-Ukraine crisis and coming out of COVID. Used to supply, stocks ratios were in favor of those who had supply, we saw prices move up pretty significantly. In North America, last year was record net farm income, driven off a lot of this food insecurity and supply chain volatility. That's continuing as evidenced by our recent order in Egypt for over $85 million and a project pipeline behind that that is absolutely strong. In addition, I mentioned Brazil, we've been able to double the business each of the last 3 years. For those of you who follow things like soy now is used for fuel, just like corn. That's providing also a nice basement on the floor of prices.
It really has become, as it should be, food is political. To stay in power, you need to be able to feed your people. ESG is driving advanced agronomy services in our markets that we serve because we have to do more with less. In infrastructure, we are on a once-in-a-lifetime move energy transition. If you think about even this city right here that we're sitting in, there was a time when there was coal burning, and we moved to electricity, and prior to that, wood. These transitions happened, if at all, once in a lifetime. As we move to renewables, that will shift over the energy production into a very fragmented way, a very distributed way, as opposed to a central nuclear plant or a coal plant at 1 gigs of production. You now will have 10 production lines.
All that takes thousands and thousands of miles of transmission and a 5 to 10x increase in substations. The mandates that are out there alone, just for 2035, outstrip the market capacity significantly. We know that our other parts of our infrastructure market, like telecom and the 5G rollout, is just in the early innings. Coverage was key up front. Now we're working on densification. That's just in the U.S. Europe, just starting down the road. Australia and New Zealand, just starting down the road. Because we have presence in these markets and with our relationships, as an example with Ericsson, we are gonna go and continue to expand those offerings and products and services. Roads, transportation, highway spend, also now has a 10-year bill, in addition to what the states have been able to put forth themselves, just here in the U.S.
All of that takes our products. We're just beginning now to see the effects of the IIJA that was passed over two years ago in our quoting activity, and as we get into 2024 and beyond, that will be of significant help to us. I'm excited to talk about Run, Grow, Transform. We think of this as our internal framework around our resource allocation, our capital allocation, and frankly, our time and effort. We're building now on a solid run platform and foundation of the business. The business is operating well, it's being managed well, we're pricing well to the market, and we're now using that foundation to help spin off capital and the best people to move into our grow and transform. We have the ability to grow outside the U.S. We have the ability to add more in our offerings across the board.
There are natural adjacencies like OEM parts in our irrigation product line that we can build upon and that you'll hear more about. Transform is really making sure that we're being great stewards of the company long term. What can we do long term to transform the nature of our revenue, the nature of our services that we offer to our customer, ultimately, so that we are the disruptor in our markets, not the disruptee. We have really good starts in this area, but you'll see more and more focus on transforming the business beyond poles and pivots, as you may be accustomed to. Some ways that we are growing and transforming are found on this slide. I won't go into them too much because I don't wanna steal my colleagues' thunder when it comes to their presentations.
You can see there are a number of factors that are out there in the markets beyond our traditional drivers that will help us grow and transform our revenue and operating income. We have a unique right to win in these markets. We have the product and service expertise, we have the ability to bring things to market wherever they need to be brought, and we have the proper resource allocation methodology to not just look at today, but also well into the future. Okay. We talked a little bit about digital transformation, and I'm sure you've heard this from other companies as well. What does it mean at Valmont as compared to those other companies? For us, first and foremost, it's about technology sales. You've heard the expression, you can't save your way to prosperity. It has to drive our top line and bottom line.
Whether it was Prospera's acquisition or other small technology acquisitions that we've done, R&D money that we've increased, we are focused on the future of technology sales. You've heard us say that we doubled recurring revenue last year. All of that comes around technology. These are real efforts that we're trying to put our best and brightest on. Using data science, right? Leveraging the data that we generate ourselves, or that come from the markets that we serve, to give us better predictive and insightful readings, opportunities. Whether that's for pricing purposes, whether that's for operating leverage purposes, or whether it's actually comes to what we offer to the market in terms of new products. People, process, culture. In today's day and age, people work differently than they did just 10 years ago.
We have to continually adapt and embed better technology in our organization, because the worker of not just today, but in the future, will demand this. To keep the best and brightest and to keep our talent, we have to make it more technology-oriented. That also translates into new ways of working. If we've shown nothing else, it's that we're adaptable, and we're quickly adopting the new technologies, not just in the office, but in our production floors. You'll hear more from Diane about that as well. Okay. Now I just wanna take a moment to describe our ESG journey. As you know, this is not something that we decided to do to check a box. It's something that we've done all along. Every product that we offer is 100% recyclable.
Everything that we do helps conserve the natural resources that are out there, whether it's water, it helps save lives on our roads and highways and bridges, or it improves our life in terms of the electricity and the telecommunications connectivity that we offer. We have nothing in our portfolio that we need to be ashamed of. This is something that I took on personally to lead the charge, because I also know that it would focus our marketing message, it would make it clear to the organization what we do and what we are, and frankly, at the end of the day, it saves us money. It's a relentless focus on waste, no different than our lean manufacturing. We find areas of opportunity every day, our green teams that are out in the production areas, or whether it's in the design of new products.
Again, we do things correctly right from the start. Speaking of that, a big part of how we are grounded is the quality of our board, and we have an excellent one. As you can see, we have a group that has a quite a diverse set of backgrounds and skills that we count on as we develop our strategies to go forward. Every member of this board contributes meaningfully to our strategy, to the way that we look at markets, the way we look at new products, and as you can see, with the way that now things like cybersecurity and other environmental issues are a big issue, this team here can pull it together for us. We have a combination of board members who have been around that really know us, as well as new board members that bring fresh perspective.
I can tell you myself, I love working with this board because of the perspectives that they give to the organization. They're not afraid to speak their minds, and it really helps us in developing our strategies. In addition, this is my team. They are excellent, and they do a fantastic job in all circumstances, and all we have to do is say, "Go take the hill." You can see a nice mix of people across the board, either in new roles within the company that they're able to move around. Myself, Josh, Aaron have all moved around in the company through different product lines and segments, as well as bringing in new talent. You'll hear from Diane and Daniel today, who are relatively new to the company, as well as Avner.
Both Diane and Avner joined three years ago in the height of COVID, Daniel with the acquisition of Prospera. All right, now the money slide. These are our new financial targets, and we're proud to put these forth because what they show is that we will grow 5%-8% organically through the cycle. We're not just depending on ag markets and other things to stay up. We will generate 14% operating margin while continuing to invest in our grow and transform activities. By really making our run business hum, we will be able to continue to grow and gain leverage, which will ultimately translate into 12%-15% earnings growth per year.
More importantly, and a big part of our incentive, is we will target 18% return on invested capital through many different methodologies and forms that you'll hear from both the team and also with Avner kinda summating that up. This does not include any acquisitions, but obviously, if we were to do an acquisition, we may not be as linear in getting to our 18% return on invested capital, but we will get to those targets. With that, I would like to introduce Jason Hixson, who will talk about the irrigation.
Thanks, Steve. Good morning. My name is Jason Hixson. I've been with Valmont for eight years. I joined the company as the Global Vice President of Operations for the Irrigation group, then I took over the international irrigation business, and then last year in February, I was asked to take over as President of the irrigation business. Today, I really wanna talk about driving growth and transformation in our agriculture segment. That growth is built around executing our strategic framework of Run, Grow, and Transform. With Run, as you know, we have great macros with a strong base growth driven by growing global populations, food security needs, and resource conservation. Our growth framework is about accelerating on top of that strong base, expanding our international business, delivering innovative products and solutions to those higher growth market segments.
Finally, our transform segment is about putting the icing on the cake, adding innovative technologies and services to drive agricultural productivity, and Daniel's gonna talk about that in a minute. All right. Let's talk about 2022, last year. It was another good year for our business, with results reflecting continued adoption of our solutions around the world. Specifically, I wanna focus on product mix. Our technology sales are approaching 10% of our global revenue. We've just started to unlock the synergies from our acquisition of Prospera Technologies. Also want to focus on the geographic mix. Currently, 43% of our revenue is now coming from outside of North America. We're also intensely focused on further diversifying that geographic mix while respecting our North American legacy. Let's talk a little bit about where we were in 2013.
For those of you that were watching, we had record revenues for the entire irrigation industry, driven by increased commodity prices. Just a reminder, why do we have those increased commodity prices? We had significant drought in North America, storm seasons, corn for ethanol, increased soybean production. That net farm income really led to an increased investment in capital equipment and land by growers in the U.S. In 2013, it was primarily a North America business, based mostly on equipment sales with little to no OEM aftermarket presence. Fast-forward to 2022, last year, we're a very different and more resilient business. International expansion is an economic driver for our business, and as we diversify our mix into more global, higher growth markets.
We have the largest installed base of equipment amongst our peers, that allows us to leverage a robust aftermarket parts business, which now includes parts for all brands. We also have the largest global dealer footprint in our business. An example is Brazil. In 2013, we had 12 dealers. Currently, we have 42 with over 100 points of sale in the country of Brazil. Fast-forwarding to 2027, there's many more growth and transformation opportunities ahead. We're excited to rebrand our Valley Irrigation business as Valley Agriculture, that'll be coming out later this year. This better reflects the evolution of our business and the baskets of products and solutions focused on holistic agriculture productivity. By 2027, our presence in equatorial markets will be a bigger piece of that mix. Why are equatorial markets important? Two words, runtime.
Compared to North America irrigation machines that run 800-1,500 hours per year, those equatorial markets have runtimes that average 5,000-7,000 hours per year, which leads to more parts in a much faster timeframe. Just the math shows you know, in North America to hit 10,000 hours, which is sort of our magic number on when a machine starts needing more parts, it would take 10 years, whereas in an equatorial market it's two years. We're really laser beam focused on those equatorial markets. We will be selling a broader solution set in those expanded markets with the non-equipment sales expected to exceed 50% of the total sales in the business.
We're gonna continue to expand our large turnkey project business, which fueled a lot of our growth last year. We're gonna actively leverage our funnel of sales opportunities with our experienced local team. As Steve mentioned, we've got a fantastic local team around the world in each of our major markets. What does that mean? Well, really, we wanna be the partner of choice for growers as they strive to maximize that productivity of their fixed land assets. Just as a reminder, what does land productivity mean for us as we define it? Well, it's doing more with less. Less water, labor, power, seeds, chemicals, all that matters to our growers. Also, we're in a unique position with our Prospera partners to monitor those crops 24 by 7. Those cameras that are on those pivots, they work at night, and it doesn't matter.
We're driving Plant Insights to growers' hands faster than other methods to make those decisions faster. We think speed and time matter. As I mentioned, we have local support in every country that's a short drive away from those growers. When you think about it, we have a unique ability to serve these customers with our global differentiated assets. We have 770 global dealer locations. More than half of those are outside of the U.S., which is approximately two to three times our closest competitor, depending on the region of the world that we're in. We have a fantastic dealer performance program which holds those dealers accountable to our high standards. We have a fully localized business in each region that cuts lead times to those growers and provides local support on the ground. Diane's gonna talk about that in a minute.
We have an aftermarket parts business and service depots in each of those major regions. Using our remote machine diagnostics technology, we're able to proactively identify field needs before they become catastrophic, and we think that's important. As I mentioned a second ago, we made a change a couple years ago to offer parts for all brands of equipment, which is driving volume and allowing us to win. The other aspect is our proprietary capabilities. We have the largest IP portfolio in the mechanized irrigation industry. We have the largest base of installed running machines driving those parts sales. More hours internationally, especially equatorially, matter. We also have the largest number of connected devices, which helps us drive ARR. Last year, with the help of Prospera, we launched a satellite connectivity service.
In areas of the world where they don't have good cellular technology, this satellite technology we feel is a game changer because it allows those pivots to connect. We also have turnkey design capabilities, which was a change we made a couple years ago, which allows us to see those large projects before they go out to auction, before they go out to bid. We're actually being invited up front on a lot of these large projects before, you know, they hit the auction market. I wanna take a deeper dive into our market drivers. As I said a second ago, land productivity is necessary to reduce those input costs. For growers, basic productivity matters always. Growing populations around the world getting to that 8 billion people. The other thing is evolution of global middle classes' dietary demands.
Research shows that as people, you know, go up the economic scale, they want more protein and better sources of protein. Much of that protein in the world that's supplied is actually fed by yields from irrigation. As Steve mentioned, food security is now equal to national security. Governments are deploying their budgets to enable self-sufficiency and stability. We have that largest installed base, it's driving significant aftermarket parts opportunities and a replacement cycle in the equatorial regions. Just to call it out, we define equatorial as Sub-Saharan Africa, Middle East, Brazil, other parts of Latin America. Labor availability, it continues to be a constraint for our growers all over the world. Digital farming and digital farming management will unlock the next wave of agricultural productivity.
Every single grower that I talk to around the world has an issue with finding people, retaining people, training people. Labor continues to be an issue and will continue to be a big issue going forward, we think our products and services really dovetail nicely into that. Also, as Steve mentioned, our customers globally are asking us to support their sustainability initiatives, and those are really being driven by constrained natural resources around the world. Okay. Let's take a look again at the machine, our pivot here. It's important to keep in mind how powerfully additive the productivity our core pivot irrigation technology can be. These are some proven benefits of center pivot irrigation over basic dry land farming practices. These are average increases based upon our 77 years of experience.
The yields are significant and continue through the life of the equipment, which is something that not a lot of industries can say. The life of those pivots, those yields are going to continue. These are USDA data from North America. Let's talk about our significant ability to continue growing above and beyond our strong foundations with international expansion, our growth in our aftermarket parts business, and deeper solution selling. We're not just a North America business dependent on commodity prices and weather anymore. Our international expansion has allowed us to participate in markets that are growing much faster. As you know, we've won some significant projects in Equatorial Africa that have allowed us to deploy a large number of machines that are being run for over 5,000 hours a year.
Really our focus is on turnkey selling solutions, key account selling, where we add value, especially with multinationals who operate in multiple regions, and then machine uptime, digital machine uptime and health via aftermarket parts, and those diagnostics and best-in-class dealer service. This chart really outlines our progression of our geographic mix from 13 to 27. If you look at it, in 13, 67% of our total revenues came from North America. Now, as we transform our portfolio, international sales will gain parity with North America and eventually exceed it. It's a big world out there. Our growth benefits from penetrating those new markets, as well as the higher organic demand in those markets. Additionally, we have a robust pipeline of large-scale projects in those emerging markets that will fuel growth going forward.
An interesting example that I like to use is, you know, based on our customer demand and accelerated growth of Brazil, we invested in a center of excellence. We localized most of the parts needed for production. We hired or developed subject matter experts to energize our growth. We went from less than 100 employees to now in 13 to now over 400. We're now the employer of choice at our locations in Brazil. For agribusiness, the best people wanna come work for us. We went from 12 dealers to 42, as I mentioned earlier. Let's talk about growth. Our growth initiatives, one of our big ones is our aftermarket parts, a significant driver for growth. The 2022 revenue was $240 million.
We're projecting that more than double that run rate by expanding to $540 million by 2027. A couple of years ago, we did open up our catalog and our parts offering to include items compatible with competitive equipment, which expanded our served market by 2x. We really have an industry-leading geographic footprint with 13 distribution centers around the globe. We're adding additional centers in Alabama and Spain this year, that really allows us to be a trusted partner of choice when a machine needs service or solution. As our installed base grows and ages, we estimate that the average machine with 10,000 hours requires $2,000 in parts per year. As I said before, that equatorial market where those machines are running 5,000-7,000 hours, they're gonna hit that 10,000-hour number in 2 years.
Let's talk about transform. We're digitizing this after-markets business, which helps us fuel a highly recurring revenue stream by eliminating the friction to customers and dealers, lowering the cost per transaction, and leveraging our inventory investment. It's worth noting that we're also looking at inorganic opportunities in strategic geographies. We'll move on to a case study, how we're succeeding with those new product offerings. Last year, we deployed an Ag Solar 30,000-acre farm in Mato Grosso, Brazil. This is a year-round farming operation growing corn, soybeans, and edible beans. The grower was able to reduce their annual power bill by 52%, along with reducing service disruptions from that unreliable local grid. This grower is also an early adopter of our new Ag Solar monitoring solution.
It allows them to see in real time the return on investment, how much power they're generating, and the plant efficiency via their cell phone. This product was launched in less than a year, we're very proud of it, and relied heavily on the advanced technology synergy and development speed from our acquisition of Prospera Technologies. I'm excited to share the 27 goals. Global sales revenue growing to $2 billion through the agricultural cycle. Sales outside of irrigation equipment to account for more than 50%. Geographic mix to achieve parity between North America and international, and then eventually international pass. We're gonna grow our dealer points of sale to 1,000 locations around the world. We're gonna more than double our parts business to $540 million.
We'll end up growing our business by more than 50% while building a more resilient and competitively advantaged business with a growing stream of highly recurring revenues. Let's break down the revenue bridge. $1.3 billion in 2022, adding $550 million in equipment and parts, $150 million in technology gets us to that $2 billion. This growth does represent a significant replacement, service, and upgrade opportunity from our installed base. It also includes those grow and transform framework items that allow us to continue to expand into equatorial international markets. This is an exciting business for global growth. Achieving $700 million of incremental sales revenue by 2027 through the run, grow, and transform frameworks. 770 global dealer locations in every major market growing to 1,000.
We have that skilled global team of solution-selling professionals. Turnkey selling allows us to see those projects before they're opened up to the market. We have this unique aftermarket parts positioning to support the global deployed fleet. Our Ag Solar business, which supports growers' needs to reduce those input costs. As I said, we're gonna continue to go deeper into those equatorial markets like Brazil that harvest 2.5 crops per year versus North America's 1 crop per year. All in all, I feel we're going from strength to strength as we grow and transform ourselves, deepening our competitive moat and building a smarter and steadier agriculture business. Next up, you're gonna hear from Daniel Kappelman, President of Ag Technology. He'll discuss technology as the transformative force for our collective business. Thank you.
Thank you, Josh. Hey, everyone. Good morning. My name is Daniel Kappelman, and I am the Daniel Koppelman . I joined Valmont in 2021 through the acquisition of Prospera, a company I founded in 2014. When Prospera joined Valmont, we decided to combine all the different tech initiatives in the company. There was different acquisitions that Valmont has done in 2020, 2021 that you see up here, there was also different internal initiatives in the company. We decided in order to do some of these things that you've heard this morning, to create these disruptive technologies, we needed a strong team together, not only by headcount, but also by mode of operation and culture. We really wanted to have a tech unit in the company.
We brought everyone together, since we've been growing to about 250 people, with a mode of operation of tech and a culture of a tech company within this big organization or bigger organization. We work very closely with our partners, and we think this combination is a very healthy one that combines one of the strongest dealer network and strongest channels in the agriculture business that you've heard about this morning, but also with a strong tech group. That's something that we think is gonna provide a big change to the industry. Agriculture, as you know, is a sort of trust-based industry.
Because there is one to two cycles a year, it is more difficult to bring in technologies without sort of the history and without the brand recognition that a company like Valley and Valmont have. We think that this combination is the one that's gonna be able to bring these disruptive technologies into the industry. The team is very much mission-focused, so everyone's very passionate about making a big change to the world. Together with that, we're also passionate about creating a healthy business. One of our main goals as an AgTech business is to transform the business from a hardware sales business to a subscription, annual recurring revenue, higher margin business. That's really what we've done and what we're planning to do going forward. To do this, we think about it in two ways.
On the one hand, we're taking the technologies that are already out there. We think about them as foundational technologies, the ones that help us connect the pivots and the fields to the Internet and be sort of the base for the more advanced technologies. We take these. Josh mentioned before one example is how we connect pivots with satellite technologies. This enables us to connect every single pivot on the planet, and not just pivots, other devices on the field. That is a very important piece of the puzzle. We're pushing forward for this growth with the foundational piece of the business we call Grow. Beyond that, we're thinking about disruptive technologies. I'll share some of these this morning.
This is really taking it beyond just the connectivity level and thinking about value add, thinking about how we create more yields with less loss, not only on the pivot market, but also beyond that. A lot of the technologies we're building are very unique in a sense that their datasets are unique. The models we're building here and the technologies we're building are gonna be relevant not only to pivots but beyond the pivot. We're already looking at other markets, whether they're flood, drip, or even dry land. That's a new sort of area for Valmont and Valley to get into, and we're very excited that technology can be the enabler to get there. We envision a world that is much more influenced by robots and artificial intelligence.
We think going forward, these technologies are gonna have to be implemented in agriculture to achieve the yields we need to get in order to feed a growing population. As I mentioned, the foundation is one of the areas we're focused on, and that's what you see here, remote monitor and control. These are foundational technologies that we need to have in the world, in order to be able to have the more advanced technologies. Two other components that I wanted to mention this morning, one is irrigation optimization. Irrigation today in 2023 is still mostly done. Growers still mostly make decisions by what their next-door neighbor is deciding to do or by basic climate measures or by feeling the soil. There's not really an implementation of models and data science in this world today.
We believe that as one of the largest irrigation companies in the world, and now one of the largest irrigation technology companies in the world, we need to lead that path. We've been building models and algorithms helping growers achieve higher yields with less water, and that's a big area of focus for us. Another area is a new area for Valley Environment, which is the agronomy area. You've heard Steve talk about that before. The area of how do you spray in a more optimized way? How do you fertilize in a more optimized way? How do you even count something called headcount to know if you need to go and replant at the beginning of the season?
These are very impactful and important areas, and because of the technologies we're building, we think we have an advantage, and it's important for us to get into these businesses. We're doing that as well, and I'll give a 1 example of that today as well. While we're looking into the future and we're trying to realize the vision and mission that we have, we're also very down-to-earth. We think about grower ROI and grower value proposition from day 1. You see some numbers on the screen here, but I'll also provide a few use cases for intuition. Base case, as I mentioned, foundational technologies. These are even cases that are important for growers in order to turn their pivot on and off. Instead of driving three hours to the field, doing that remotely.
That is sort of the base case. Knowing how to irrigate in a smarter way, in some areas, it's important in order to save money. In some areas, there's just not enough water to irrigate. Knowing how to do that in a smart way is very, very important, and it's a very difficult task. In general, knowing how to optimize the pieces of the in-season decision-making is difficult. Think of it as a function where you're making lots of decisions throughout the season, but you only have one target, and you only have one sort of measure of success, which is the yield. Knowing how you've optimized that throughout the way is complex, and I think it's almost impossible to do without data science tools and without a broad data acquisition mechanism like the one we built.
One more use case is just around spraying and detecting pest and disease. You're gonna see in a moment a testimonial where it's important to find or it shows the value of finding a pest earlier on in the season rather than later. That can save a lot of yield. Even just knowing when everything's okay, knowing that you don't need to spray in the season, then you can spray, spread out your spraying. As an example, instead of spraying five or six times a season, you can spray three or four times a season. That's also very important in terms of the foods we eat or produce, but also in terms of the ROI for the grower. Every spraying round is very expensive.
In terms of TAM, the numbers you see here reflect and they're referring to the recurring revenue TAM. This is not hardware sales, this is annual subscriptions, higher margin sales. We think that a $1 billion market is a very interesting and healthy market for us to try and go after. We see growth in that, not only with new markets and global markets, but as I mentioned, agronomy and other sections that we haven't played in before. We not only think it's a very healthy and strong market today, but going forward, we think there's a lot of potential for growth. I wanted to give one example of these technologies that I've mentioned before. This is a concrete product that we have called Plant Insights. It was mentioned earlier before as well.
This product is quite intuitive. We deploy cameras on the pivot, and as the pivot goes around, we're capturing thousands and sometimes tens of thousands of images. Using computer vision, or today broadly known as AI, we're able to detect different pest, disease, nutrient deficiencies, and things like that. On the right-hand side here, you see a pest that we detect. We can detect the tiniest pest. Really, the thumb rule is anything you can see with your human eye, you can see with our system in the future, even more. The red dots over there are where we detected the issue, and the green ones are where everything's okay.
Already here you can see you should probably get the intuition of how this can provide value if, for example, you would have this pest only on part of the field, you may not decide to spray it in all of the field. If everything would be green and you'd only have a little bit of pest, you might decide not to spray on that week. While I think the initial value proposition of this type of product is intuitive because you can see here very clearly where there's an issue and where there isn't, we think this is the foundation of bigger technologies that we can't even think about today. This in AI is called perception, the understanding of the field.
So far, really, if you think about growing, there hasn't been really a good understanding of what's going in the field on a day-to-day basis. We were really just dependent on scouts. These are people that go and walk the fields and will look at a few areas in the field. It's provided a lot of value to date, but we'd never really knew what's going on on a plant leaf, plant or even leaf level on the field. We think this is gonna have a lot of potential and unlock a lot of value in the future as well, and probably change the way we grow in general.
The last thing I want to say here is that, I mentioned this before, is that these technologies are the base of newer technologies, and we think the pivot is a great place to start. If you think about the datasets we're building here and the models we're building here, it's really as good as it gets. We're looking at the same area of the field constantly, building an optimal dataset and models that later can be used in other areas as well, even with reduced datasets.
We can envision the fact that because we have strong models, we can go into dry land and have even, you know, have sparse data collection and be able to do a really good job. This is a really interesting technology, one of many that we're building to move this industry forward. I wanted to give an example of a testimonial, so we're gonna play it right now to see a grower that has been using this for the last couple of years.
If I were to describe this to a fellow farmer, it would be active real-time data, right to your phone. Without a doubt, Plant Insights pays for itself. I'm Ryan Brink. I'm the crop production manager here at Golden Grain Farms in Michigan. We grow corn, soybeans, wheat, and alfalfa. My great-grandpa was a farmer. My grandpa started our farm. I'm the third generation on our farm. I first heard about Plant Insights at a meeting. I think I knew right away that it's something we needed to do. Talking with my dad and my brother, they all were really on board with wanting to improve the information that we could get out of the field and utilize our pivots better.
Michigan Valley Irrigation, our dealer here in Michigan, got us set up right away. They made the process very simple to be able to get us rolling. Two of our greatest headwinds we face are the price of diesel fuel and reliable manpower. Plant Insights by Prospera is a way to mitigate both of those issues, which is hugely impactful to the bottom line of growers such as Golden Grain, who are operating over seven counties with very limited personnel resources.
This really improved our scouting. It allowed us to see what's happening in a certain field where maybe we wouldn't be looking. We're getting the exact pictures of what we need, what we wanna see. It's not filtering out information that maybe a scout doesn't think is valuable. Weed identification, nutrient deficiencies, anything that the cameras are seeing that could be a potential problem in the field, it's getting to us right away, and we can ID that at a really a faster rate. Plant Insights was able to pick up on certain areas that we were having nitrogen deficiencies in the fields. We have planned fertigation passes, but we actually moved those ahead based off what we had seen from Plant Insights that our tissue samples weren't picking up on.
That's something that's really important to us in protecting the crop yield that we have. This year we actually did one less fungicide pass on our corn. Helicopter costs and fertilizer costs, we were able to save quite a bit of money limiting unnecessary passes. Post-harvest on the field, we've really seen our ROI improve. I think seeing some of those earlier deficiencies allowed us to push for a higher yield with using Plant Insights. It really was one of our best yields we've ever had. It gives us the peace of mind to be able to know that our inputs are going to good use and pushing for a higher ROI. I would recommend Plant Insights to other farmers. I think no matter what type of farm you have, it can bring value to your operation.
Hopefully that emphasizes a bit of what I described just in the slides earlier on. Just to summarize and bring everything back. To create this change, a lot of foundational work is needed. We're focused on really connecting every pivot on the planet and building the foundation, whether it's on the hardware side and connectivity side or the software side to build these technologies, and building the right team in order to create these disruptive technologies. We have ambitious goals. We're aiming for approximately 10% of total top line to be coming from annual recurring revenue, which I think is going to be very healthy for the business, and we're very excited to do so. Thank you very much.
Okay, we're gonna do that. We're gonna go ahead and start our first Q&A session with this morning's speakers thus far. As I mentioned earlier, we have some mics in the room. We'll just go around and pass. We'll start with Rob. There.
Hi. Good morning, and thank you. Just two questions on ag tech. I guess the first is, as you look at Plant Insights, can you talk about how that's being sold to the farmer who may or may not be using your pivots? Maybe it's a different way of being sold for someone who has your equipment in the field versus somebody who doesn't. You know, if it's equipment, software as a service, however we can understand it.
The second question is, when we listen to what the equipment manufacturers like Deere and CNH are talking about, they seem to be offering similar type monitoring solutions that look at crop inputs, pests, weeds, you know, other things that are impacting yields. Can you talk about how this either competes or complements it? Are these farmers that buying technology on their, on their farm equipment, either choosing to put it on that equipment or a pivot? I think you kinda understand where I'm going.
Sure.
Thank you.
Yeah. Okay. First of all, the first question. Today we're doing a combination of hardware sales and subscription sales. When a grower buys Plant Insights, they're gonna pay upfront for the hardware, the cameras. We try to create a really economical model, a cost-effective one, so it's sort of almost a no-brainer. There's the annual recurring revenue, and that's where we're focused much more. We're aiming to bring that up and, you know, sort of when we started out, we had that extremely high just to be able to prove that, you know, the value is there. We kept the numbers really high just to test the market, and now we're sort of bringing them to an area we're comfortable.
Again, the focus is mainly to create this subscription model. We also see this complementing agronomy services today. Agronomy service today are one of the most recession-resilient businesses you have. You need agronomists today every single year, and so we see this as something very complementary. That's sort of how pricing works. In terms of how we work with other OEM services, first of all, to be clear, this technology we put just on pivots. We think it's the foundation for new data acquisition methods, as we call them, whether it's robots in the future or drones or other devices on the field. Today it's just on pivots and we think that it's actually complementary to what some of the OEMs are doing.
If you see sort of the cutting edge of what OEMs have, technologies like See & Spray that detect different issues, that is very ad hoc. That's when the system is in the field. Because these technologies are very complicated, they're, you know, hopefully they look easy to build, but they're multidisciplinary. You have, you know, hardware, software. It's really the worst environment you can build hardware devices in. You have computer vision on the back end. You have to know how to work with growers and to make usage very, very easy. These companies are focused mostly around weeds-within the season. This is much more comprehensive. If you think about an OEM manufacturer that has, you know, a sprayer in the field, the sprayer's already there. We're there all the time.
The pivot's there all the time. We know in advance, you know, when to send the sprayer, why, where the sprayer should focus. We wanna work on things like weed maps that we'd provide to the sprayer in advance, and other areas like you heard the grower talk about nutrient deficiencies. You don't have tools for that. I think our solution is much more comprehensive and throughout the season. In the future, I think it's gonna complement. I don't think it's gonna be one or the other. I really think both of them will be there. I just think we have a, you know, real competitive advantage in an interesting area, both for the, sorry, pivot business and beyond.
All right. Ryan Connors.
Thank you. Yeah, congratulations on a great presentation. I thought it was very well done. You know, one of the things I thought was pretty striking having sat through a number of analyst days for Valmont and even your peers over many years is I don't think I've ever seen dry land conversion and sort of adoption from flood. I think it was hardly mentioned, if at all, not very prominently as a growth driver, and over the years that was often seen as kind of the growth driver was adoption of mechanized irrigation. Should we interpret that as a sign that you think the market's a little more mature now and the next phase of growth is to add technology, or was that or is that still part of the story and just you didn't wanna highlight it here today?
Yeah, I'll take this one. It's always a part of the story. Oftentimes we're asked the question as to where we sell pivots, and it's new land development, conversion and expansion, and or replacement. Those ratios over time really haven't changed for us, kind of a third, a third, a third in North America. I think the reason that we maybe it doesn't show as prominently is because we know that growth is coming from other places in a much more pronounced way. On our last call, we talked about Brazil really converting new land over to pivots at almost 40, you know, 45%, in addition to just amount of land development going on.
Those are much more significant drivers for our sales and profits going forward than just being solely focused on North America, you know, and flood conversion. It's there, no doubt, but as Jason Hixson pointed out, you know, we're gonna quickly pass 50% of our sales coming from international. Really the focus around parts and then new pivots in areas that are being developed, is really the strength of the business at this point.
John.
Steve, in your commentary about the utility business, you mentioned that the renewable mandates will probably outstrip the industry capacity to meet those mandates. What does that mean for pricing as you go forward?
Good question. Being that I ran the utility business at one point. I think what you've seen the industry do is, we're very cognizant that stated goals and then what actually comes through in the market are tend to be two different things, because of permitting, right of way. There's a lot of projects that tend to get delayed and moved along. Generally, we've seen positive momentum on pricing across the board in utility. Whether that's our concrete products, our steel products, our substation products, our PureMAX structures. Aaron will talk a little bit more about the dynamics in the market upcoming here shortly, but pricing is very strong. We're like at 40 weeks, lead time, pretty much across not just ourselves, but our competitive base.
I think the competitors are also adding capacity in a smart way, as are we. Most of the people in the industry were here back in, you know, 2013, 2014, 2015. The industry has been very rational, and I think the biggest reason for that is utilities don't just bring on supply willy-nilly. It is very hard, even for ourselves, to get a new factory approved. If you have an existing factory and you can expand it, you're much better. Just because we're Valmont and we say we have a new plant, they may or may not approve the plant.
That also, I think, has kept the competitive edge just, you know, right where we need to be in terms of supply-demand. We probably need lead times down a little bit. We have some things that Diane will talk about to address some of that. Generally, pricing is really moving in a positive direction and I think will even more so because the critical nature of delivery for our products, when you have union labor and 90% of the cost out in the field, is so important.
Thank you.
Brian Drab maybe next while we're waiting for Brian, he's up here in the corner here, Christine. just a reminder to those of you who are on the webcast, if you wanna ask a question, there's an ask a question tab in the upper right-hand corner. You can use that.
Okay. Thank you. I just wanted to make sure that I got a couple of these numbers correct. First, I think Renee had been asking for, you know, what percentage of irrigation is the parts business for a while, this is a first. I always thought it might be about 15 because Lindsay's 15-ish. I guess it's 18% of sales, and in the projection it looks like it's going to 27% or 25%-27%. That's a much bigger piece of the business going forward. I guess can you talk about, you know, a little bit more about what's driving that and how important that's gonna be to the business? What are the margins that you get in the parts business relative to the core business?
Go ahead.
Sure. Brian, thanks for the question. Yeah, the real big growth drivers is what I was saying in my presentation's runtime. As we get deeper into these equatorial markets with a lot of hours on these machines, they're requiring more parts because, you know, growers want those machines well-maintained, so they're applying water in even fashion. They use them for fertigation. They wanna make sure that they're at their maximum operating efficiency, so that's driving a big part of it. The other thing is just being present in markets, having the, that footprint, the 13 distribution centers, making sure that we're close by. When a pivot goes down or has a catastrophic failure in the middle of growing season, it's vitally important to get that back up and running as fast as possible.
As far as margins, you know, we do see typical to any OEM manufacturer around the world, our OEM parts are always gonna command, you know, better premiums, just because they're highly engineered and we control the specs. We do sell, as I said, we sell now aftermarket parts that fit on competitors' machines, and some of those are a little bit more competitive in nature. Yeah, I think they're, you know, it will continue to be good growth and good expansion for us as we go forward.
Thanks. The technology sales and irrigation I think last year were $115 million, and the projection or in that waterfall build up it was $150 million.
250 in total.
$250 total.
Yeah.
Okay.
there was a piece.
I must have missed something. Okay.
Was Josh's growth versus Daniel's growth.
Right.
Because-
Got it.
it wasn't the whole thing.
Josh had a bridge, Daniel had a bridge.
The $250 includes the ARR.
Okay
... component as well.
Okay. $250 is what I thought it would be.
Yep.
Okay. I just missed that. Just the last question, just on margins in general, within irrigation? You know, I understand what you said on the parts business, but for the technology piece of that, how do those margins compare with the core? Is that one of the reasons that you're able to-
Yeah. The tech margins are.
You're projecting 14 to the company.
the growth margins in tech are substantially higher. In newer products, obviously it takes a bit longer to get to the sort of. Just 'cause you spend a lot on R&D and the initial products when you're not at you know, full capacity, they're a bit more expensive. Ultimately, these are going to sort of 85% gross margin. Extremely high margin, closer to sort of a SaaS software-based company. And also because these are, you know, out there for quite a while, we can assume sort of longer time with the grower, so we can increase margins that way as well. Extremely healthy margins on the tech side.
Nathan.
Thank you. Daniel, you talked about an addressable market of $1 billion going to $1.6 billion. What makes up that $1 billion at the moment? I mean, your share of that's relatively small at this point. What assumptions are you making for it to go to $1.6 billion? When it comes to the adoption of this tech, what are your assumptions behind the adoption of this technology? If I've learnt one thing from this job over the years, it's probably that adoption generally goes slower than you anticipate.
Right.
Just what you're assuming, in adoption rates of this stuff.
Yeah, sure. Sure, go then.
Yeah.
In terms of the current market, it's mostly around pivots. There's not just Valley pivots, but in pivots in general. There's hundreds of thousands of pivots, and then you can do. It's, you know, you can do the math to how you get to $1 billion. We've taken our different products and, you know, services and, you know, for $2,000 over all the pivots, you very easily get to $1 billion. That's mostly around pivots and devices within the pivots world thinking about subscriptions, right? Our subscription-
Generally, we think about 500,000 globally installed pivots.
Yeah. Half mil. Yeah, half million globe
It should be if all of the technology was on every pivot, that's how it works.
In areas that we can service, yeah.
Correct.
Yeah. Yeah. Today, you know, basic subscriptions could go from $300 all the way to $1,500. It depends on the service. That's exactly sort of the approach we're taking. We're thinking about this much more in a subscription-oriented way and thinking much more about pricing things based on value. That goes back to the value slide, the ROI slide for the grower, right? If you save every spring cycle could save thousands of dollars, you save a few of those, the grower will very easily pay, you know, $1,000 or $1,500 a season for that. That's how you get to the billion market.
The 1.6, it's adding both new features but then going into the agronomic areas as well. That's how we grow that business. We're trying to be conservatives there because the agronomy business is huge, right? If we look at companies like Nutrien and other sort of agri-tailers, that business is, you know, probably $100 billion. We're not looking at all that. We're looking at a specific segment of where technology could complement, and that's where we get the extra 0.6. You know, personally, I think it's gonna be higher than that. It's more of a conservative number that we came up with.
To your second question about customer adoption, yeah, you're, you're totally right. This is one of the hardest areas to get grower adoption. I also think sort of you look at technology in general, right, over the last, like, 20 years, where technology has been sort of fastly adopted was the easier market, like enterprise market or software markets or what everyone here has on their laptops. Agriculture is way more.
Right
fragmented and just more difficult to get into. That's exactly why we think this is gonna work with a brand like Valley. I was in an event a couple of months ago where, you know, some growers passed by all the tech booths that were out there offering different technologies, and they stopped at Valley and didn't ask questions and just signed up. I asked them, you know, "Why didn't you look at any of the other booths there?" I was one of those booths, you know, three years ago, I was standing there. Today it's very easy. They just said, you know, "We trust Valley." It's a company been out there for 75 years.
I think, you know, there hasn't been lots of brands, new brands in agriculture in the last, you know, century, especially not in tech. I'm not even sure there's one. We think this combination between bringing the brand recognition of Valley together with proven technology, and I talk about the foundational technology, I talk about how we leverage AgSense and the fact that that's just been working, so growers trust it, and having a team that's very hands-on. We like to call ourselves the data wizards in muddy boots. The reason is we just spend a lot of time in the field, a lot of time with Jason's team, and that's how we think we're gonna get grower adoption. So far, by the way, it's I think, it's actually exceeding our expectation, not the other way around. We come very humble to the field, but it's going quite well.
John from D.A. Davidson, you had a question, right?
Hi, thank you so much. So you mentioned soybeans being used in oil, in fuel. Can you talk about what sort of opportunities this brings to Valmont? Just generally looking forward, do you see this as a succession to corn ethanol, or is this more of a different opportunity or a different segue?
Yeah. It tends, soy is being used for more biodiesel. Think of heavy trucks and transportation. That is where most of that capacity has gone. Europe started this. It's really blossoming out from there. What it does, anytime you have kind of a baseline demand for a crop, it keeps prices and keeps growers kind of anticipating a range that is less volatile than it used to be. When they forward project equipment purchases and other things like that, they can put a worst case scenario that is better than it used to be. For Valmont, it's important because of our Brazil business specifically. Brazil is the largest producer of soybeans in the world.
They are benefiting from much of the geopolitical issues with the U.S. North American growers are not exporting as much to China. Brazil has picked up the slack for much of that. Because we have now, 42 dealers in that area and growing, and areas that are opening up for that kind of production with our machines, with the technology, because in Brazil, they adopt technology very quickly, when you offer it to them. It's just a good driver for the business overall. It's, it's one of those things that will give multi-year kinds of, farmer sentiment increases, when they're in their planting decisions and equipment purchases.
Thank you.
Brian Wright over here.
Yeah.
Thanks. To continue on the theme of lower volatility, the CAGR profile assumes through the cycle. Given what you're talking about Brazil, the ARR, should we think about the downside of the cycle being less, the amplitude being smaller than what it has been in the past?
Yeah. That was true before for us, that each low was higher than the last low. With the efforts we have now with aftermarket parts, with technology, with the geographic expansion the next low will be much higher than the last low. Then it'll be a great business on the next, you know, big upcycle, which, you know, I know a lot of people think we're over the top already on ag, but I'm not so sure.
We have an El Niño setting up. It'll be North American dry conditions. There's a lot, particularly in North America, that is still left to be had. But elsewhere in the world, the cycle's still very strong. It's a good way to look at it. We are trying to build more and more opportunities for green shoots during these times, because in our minds, we want to not be as cyclical. We can't avoid it completely, but we wanna be much less so.
Just to follow up, I heard you talk a little bit about drip technology and that's not something you've played in historically. Just kinda what your thoughts are around that opportunity.
Drip. Yeah.
Oh, drip.
That it?
Go ahead.
We're not actively going into drip, at least on Josh's business. In our business, the technologies we're building today are applicable to most of these markets. If we decide to go into drip, we have a strong foundation with everything we built, and we're actively looking at not just a drip, but flood, at dry land. These are more like proof of concept areas. It's areas that we have the capability based on what we've built.
Sure. Brian.
I was doing some reading on Brazil, since we're talking about Brazil so much the last couple months here, especially. This governor from Mato Grosso is kinda taking a tour of the U.S., I guess the third largest state in Brazil. I was surprised that he said 1.5% of his cultivated land is irrigated.
That's correct.
I mean, I've covered the company, Valmont, since 2010, I think. Been talking about Brazil as a growth area for a long time. I didn't realize, you know, that the third largest state would only have 1.5% penetration. Why is that, and why is this?
You know, has that been growing from 0.1% to 1.5% for the last 10 years or something?
You could. Yeah.
Why is it accelerating all of a sudden? You say we're going to a third, it's like you just discovered irrigation. I thought it was a huge growth market for a long time.
Yeah. Brian, great question. you know, Brazil is, as I said, is a fantastic market. We've invested heavily in that. It's 1.5% just in Mato Grosso State. The entire country just hit 10% irrigated, whereas in the U.S. we're 54%, Nebraska alone, our home state, is almost 20% of that, you know, irrigation capacity. you know, why has the adoption lagged? Well, historically, if you saw the governor's pitch, which we sat, or his speech, we sat through it, he was talking about weather patterns. He was saying that, you know, in these equatorial markets, have relied on a lot of rainfall because of the rainforest and some of the other cycles.
They were actually able to get two crops in Mato Grosso without supplemental irrigation. Now, because of the way the weather patterns are changing, their second crop is now at significant risk, and forget about that third crop. There's no way you can grow it without, 'cause it's so dry during that season. You know, people think about rainforest and equatorial markets, they think about, oh, it's a rainy season, it's a wet climate, it's so. That's for a short period of time. You know, even areas like in Southeast Asia, they get a lot of rain in a short period of time, and then it's very dry.
When you think about, like I said earlier, the protein that we eat, it's all fed by really irrigation, because animals don't care if it's a dry season or a wet season, they need to eat all the time. You know, that's a big part of it, I think is the weather changes. Also, Brazil's obviously going through a lot of discussions about land and land use, and they're changing. They have a grazing cattle industry. They're changing, they're gonna be adopting or they started to adopt more North America style feedlots with different genetic strains. That's a big part of that land use being turned into cropping land now. They're moving pastures into cropping land, which, you know, also helps them, you know, utilize that land productivity significantly.
Yeah. The pitch by the governor also was around that their corn yields are not close to North America because of the lack of rainfall. 53% of the land in Mato Grosso is federally controlled Amazon land that they don't touch as a state. They need to make the land that they already have in production more productive. When they look at those corn yields specifically, they know that that's all about water, and water at the right time. The recent uptick has been around corn primarily. They have obviously a replenishing aquifer.
Water's not the problem, it's getting it at the right time, to support both ethanol and the cattle industry that Josh mentioned. It's very early innings, and, the growth that we've seen, like, you know, we've doubled the business each of the last three years. That's why we are so bullish on the market down there. The market will give a lot. They are adopting quicker. If you wanna hit those three crops, you need the pivot. The payback on the pivot is superior to even any other piece of farm equipment at that point because it gives you three crops.
Maybe just one more point on that topic, specifically about Brazilian technology adoption. Why we're all so excited about that is during the pandemic, many of the sons and daughters that were living in the large cities, in technology actually relocated to the farm and were working remotely. Well, now they've decided that, hey, I can help my father or my mother or family out on the farm, and now the average age of the farmer has dropped to 42 years. Whereas in the U.S., it's over 60 years old. We're seeing, you know, as Daniel said, Brazil is hungry for a lot of things, and one of them is technology and, you know, in irrigation equipment.
Just one follow-up. Do we have time for? No?
I've got an online question I'm gonna get to first, Brian.
Sorry
Steve, I'm gonna direct this one to you. You've been very disciplined stewards of shareholder capital with a lot of care applied to investment, dividends, and stock buybacks. At what point would you consider helping to finance your products or services?
Good question. We aren't a bank. We don't have a balance sheet to go after that kind of business per se. We would like to work with capital partners in that endeavor. We believe it would fundamentally change how you buy our equipment, particularly on the irrigation side if that kind of credit could be made available. It is something that we are working on, but not yet at a point where we could offer it to the market.
Yeah
We know that there's a used pivot market. We know that pivot market is generally pretty predictable overall, and therefore, the residual values are pretty well known. It's just lining it up with the right capital partner in the right areas, right? We, we will look obviously at the big markets first, before potentially looking at that elsewhere.
Thank you. Maybe you have time for one or two more questions if it's quick. Ryan? Oh, no, Ryan. Sorry.
That's all right.
Thanks, Christine.
Just a quick question on kind of the dealer network aspect of this. I mean, obviously rolling all this stuff out sounds great from the big picture, but it has to be done at the ground level by the dealer network. Do you believe that might be a gating factor? What kind of investment would you have to make potentially in training and/or, you know, upgrading of dealers to actually accomplish some of the things you're talking about in tech?
Okay. Yeah. The dealer network, first of all, I can't emphasize how strong the network is, especially for sort of breaking in tech. I think we're looking for areas where we provide them a lot of value. I'll give you one example to create intuition, which is, every issue they had with technology device that they'd call the call center, right? We'd have like thousands, if not more, of phone calls every single day. We have a call center in South Dakota, Huron. We just built an initiative called self-service, where we created these sort of videos over YouTube and just like quick tips for how to do that.
Suddenly the dealers got way less phone calls, or if they did get one, they were able to refer the grower to the YouTube channel or to the, you know, the tutorials we had. That's, you know, that's very, very simple, but it sort of shows there's lots of value to give to the dealers as well. Clearly the most difficult one, if you wanna sort of pinpoint where it hurts the most, is like, how does a dealer now, you know, say 'cause his word is worth more than anything, right? Like a good salesperson. How do you convince the dealer to say, "Yeah, take this Mr. So-and-so." We had to prove to them, right? This is not the first year of technology.
I wouldn't argue that a new technology that hasn't been tested at all would get out there to the market. We spent a lot of time. We still do. In any technology we have, we spend a lot of times to get the dealer on board. Josh has a dealer council forum, and we're partnering on that, and we use everything we can to make sure the dealers get the experience, so they can vouch for the technologies.
Today we have that, right? If we have any issues, we'll go out there, and we work very closely. Just where I started from, the dealer network is a super powerful network, and we do a lot to make sure they're on board. We are also creating more things like online channels and different things that will complement and help them. In general, we work very closely with them, and we make sure they're comfortable with the technologies.
Yeah. It's perfect to be with you today because actually this week we launched our AgTech Tour. Formally it's kicking off in New Jersey this week, and it's a partnership between Prospera and Valley. We outfitted a van, literally our salespeople are driving that van through all the regions and showing growers and dealers this new technology and what's being offered with Plant Insights and Irrigation Insights. We actually put out a survey to ask dealers, you know
"Would you be interested in sponsoring us for a day or having us there, having a lunch?" We're oversubscribed. There's like 90 some stops, and you all can follow the van as it goes across at agtechtour.com. It's, you know, that's a site we own, so it's very interesting to see where they're at. There'll be testimonial videos, there'll be diary updates and tech updates. Very good adoption by those dealers in embracing this technology.
Ryan, I would just add, growers are looking for persistence. They want to know that you're not gonna back away from a solution that they're gonna invest in. I think, you know, buying Prospera for $300 million, and then the money we've put towards it, and the AgTech Tour, and the testimonials by Ryan, all of that feeds into the psyche of, "They're here, they're serious, they're gonna keep playing. It's not vaporware. You know, it's a model that I can understand. I have other growers that can tell me what it means to save money with the solution." That's how adoption, again, persistently over time, because all of our markets have been that way, but persistently over time, that's how we'll win.
All right. That is all we have, at least for this first Q&A. Thank you for your questions. We're going to do about a 10-minute break. For those of you online, we'll be back in about 10 minutes. Thank you. [inaudible] Okay, if everyone could take a seat, we're gonna get started here in just a minute. Okay, we're gonna go ahead and get started. Welcome, everyone, back from the break. Our next presenter is Aaron Schapper, who is our Group President of Infrastructure.
Thank you, Renee. Good morning. My name is Aaron Schapper. I've been with Valmont for 12 years. I'm one of the employees that's, you know, the experience of starting in a few of our different segments. I started as the Vice President and General Manager of International Irrigation on that side of the business. Ran the engineering department for irrigation for three years, moved over, was the President of the Utility division at the time, did that job for three years, and the last three years, I've been in charge of our whole Infrastructure division, which is the product lines I'll talk to you about today. Kind of really been around the different parts and pieces of Valmont and parts of the business.
You know what I want to talk about today is, you know, Steve introduced the ideas of the framework of Run, Grow, Transform. When we take that framework of Run, Grow, Transform, we'll talk about what that means for Infrastructure. First of all, if we look at the Run side of our business, really what we're looking at is optimize and actively manage the portfolio. The Infrastructure business is a portfolio business. We have a lot of different product lines in there, and so actively optimizing and managing that portfolio is a big part of running our business. The second one is really reducing complexity. As we put all those different segments together into the one Infrastructure segment, why did we do that? We did it to reduce complexity. Simplification, leveraging resources.
It doesn't matter whether you're on the operation side or the business side, it really is about pushing productivity. When we remade that segment into a single infrastructure segment, it was really about productivity and pushing of productivity, and we continue to do that today. The Grow part of the business. When we look at Grow part of the business, I'm really excited to talk to you a lot more about energy transition. It's a big, big deal. It is a big change. You know, we talk about infrastructure, and the words dynamic and infrastructure rarely go together. Today, with the changes in energy transition, it is absolutely a dynamic business, and infrastructure will change dramatically in the coming years, and I'm excited to talk to you guys about that. Aging infrastructure, storm proofing, all of these things continue to happen. Growth is...
Growth is a great opportunity for us also internationally. When we look at our business. Transform. When we talk about transformation, it is always driven by technology. Technology-driven solutions for our customer. Infrastructure, we always work to make our dumb infrastructure products smart. In the future, this is gonna be a more critical driver for making the right kind of infrastructure for our customers and bringing that value. Moving forward, kind of an overview of where we are with the business. You can see that we're just shy of about $3 billion in the last year. You can see our five-year compounded growth rate expectations for each of our product lines and the way we group those product lines. If you're looking at operating margin, operating margin expectations, obviously we've on a good run. We have great trend.
If you looked at our Q1 results, that trend continues, we're looking forward to continued growth on the margin side. Let's talk a little bit about the markets that we're playing in. First of all, we're in a once in a lifetime transition. The energy transitions that we're in is real, and the energy transitions will push this market. You know, the human race, we've been in energy transitions for a long time, right? We used to burn wood. We've moved from wood to coal to oil, and oil to renewables. These transitions don't happen that often, but they do happen once in a lifetime, right?
As we've gone from a coal economy in the early 1900s to really fossil fuel economy, natural gas, Valmont is in extremely unique situation take advantage of this transition, and this transition will be pushing major trends in that transition piece. These are just numbers through 2030, and I'll go in deeper on each of these. That's one part of our business. Second part of the business, vehicle electrification is real, continues to happen. You'll have 500,000 new EV charging stations by 2030. Our telecom business, 60% data increase by 2028. A 60% data increase on everything we do. The communications, everything's going mobile. The infrastructure to support those data increases are critical, and they're a great driver for Valmont's business. Finally, we have that footprint.
When you're in, on the road, where you're driving down the road, you're walking on the streets of New York, you see our infrastructure is everywhere. That infrastructure is getting smarter. That infrastructure needs to have more and more equipment on it and integrated to it. This is a great opportunity for Valmont on the infrastructure side. Going forward, not only do we have these great market drivers, but we also have a lot of incentives to push our business forward. $550 billion in the Infrastructure Investment and Jobs Act. This is new spending for core transportation infrastructure products. All right? This is a great driver here in the U.S. $370 billion in Inflation Reduction Act. This is for that green renewable product driver that's pushing it forward. $53 billion in CHIPS and Science Act.
The CHIPS and Science Act has been interesting because that's really been a great short-term driver for Valmont because what that is doing, it is bringing manufacturing of high energy assets back in the U.S. As they're building these factories, the first problem they're running into is the electrical infrastructure, to grow that electrical infrastructure, been a great driver. A lot of regions that hadn't had big load growth all of a sudden are having tremendous load growth and the power that's needed to support that. Finally, this isn't just a North American phenomena. This is a global phenomena. All right? A hundred and thirty-five billion euro EU fund for sustainable development's going out. That is for renewable and green development in Europe as well.
When we look at it, not only do we have these great built-in drivers, we also have additional support reinforcing that demand. Let's talk about this energy transition super cycle. We'll talk about circuit line miles. It's interesting to me 'cause it took 150 years to build out our current grid. All right? You have structures on that grid that are 50 years old. Right? Not only do you have a lot of old structures, but you have structures that need to be built out. I mean, 150 years, that's using Edison's and Tesla's original inventions that have been pushed across the US. What needs to be built by 2050, and this is just based on the mandates that are there alone, right, is 75,000 at least new line miles. Right?
To give you an idea of how much high voltage lines that is, that's enough to run the distance from here, New York, to Los Angeles and back 15 times. That's how much transmission needs to be built, high voltage transmission. All right? On top of that, if you're more internationally inclined, that's circling the Earth three times, by the way. That is a lot of high voltage transmission that has to be built by 2050 to put this in. Remember, 150 years on our current grid. There's a lot of work to do. There's great fundamentals underlying the business. In real terms, we will have to be building faster than ever in order to make this happen.
The other really important trend is that power usage is becoming more renewable, so you can see solar generation is pushed up, and we'll hit solar generation a little bit, our tracker business. The power's gonna be more electric. That is one of the critical pieces of it, and that's why it's pushing both energy demand and circuit line miles. A lot of what we do will be electric, and when you're putting electric vehicles, whether it be industrial or commercial, massive charging infrastructure needs to be done for those pieces of the business. Really good fundamentals on that side. If we're looking at all Valmont infrastructure products where we play, we're right in the backbone of this energy transition. Once again, this is a once in a lifetime transition. This is a very dynamic place to be.
There will be a lot of changes in growth and money pushed into this business. We're excited to be right here in the action on the backbone of this energy transition. You can see our lighting and transportation and telecom also play major roles in the transition as we go forward. You know, the great thing about this business is there's different countries in different stages of this transition, and no matter where that country is, whether it's beginning a green transition, it's already there, whether it still just needs to build out basic infrastructure, like places, some places in South America and Africa, Valmont can meet you where you are in that journey. That's a fascinating business and a lot of fun to be in right now.
Let's talk a little bit about each of our product lines so I can give you a little bit more background. First of all, we look at the large transmission. These things, I mean, I talked about the drivers. We believe that business in five years will be about $1.6 billion. Remember I talked about all the line miles that has to be put in? That's what's gonna drive this business. The transmission capacity has to increase by 60%. That's just going to happen by 2030. There is a lot of increases that will be happening in this side of the business. Steve mentioned a little bit early, earlier about the capacity for this side of the business will be constrained. It's, that's a benefit for us on pricing.
The pricing has been good. Demand is good. I think we'll continue to progress along the in this business in particular. You know, the one thing we're not looking just for the market to push us forward. One of the critical pieces for us is to bring in the new products into this market, okay? The layering on that new product is important and this picture right here is of a Pier Max structure. That particular structure is 475 feet tall. To give you an idea, the Statue of Liberty, which I think is over that way, is about 305 feet tall. This structure is a big structure. Across the St. Charles River there in Louisiana, built this one for Entergy.
That structure is built to withstand wind loading 175 miles an hour. Climate changing storms are becoming a lot stronger, so storm and storm hardening is a big deal. Valmont's using our unique engineering and unique structures that Pier Max does that no one else does in the industry. These structures have become more and more popular, especially as storm and storm hardening is there. CEC substations and monitoring structures is another thing that you're going to see as far as new products coming out. CEC substations, we talked about those before. These are preassembled substations. Labor gets difficult and more constrained on the field, so substations, which is a major growth driver for our business. Every single transmission line that you put in needs a substation at either end. You need to step the voltage up from generation.
You need to step the voltage down to distribute. Those substations are on other, either end of those. Valmont has a unique solution with a CEC substation. It's preassembled and ships on the back of the truck so that it's assembled in the field. Another unique, innovative structure that Valmont is offering. Finally, you know, we talked about making the dumb infrastructure smart. If your infrastructure is stressed, if you're, there's never enough money for infrastructure that everyone needs. If that's the case, it's more important to understand what's going on with that infrastructure. Valmont's in a unique position. We've engineered a lot of these structures, so as we bring telecommunications, as 5G, as IoT goes, the monitoring of these structures becomes more important, so that if you're a utility, you're replacing the infrastructure that needs to be replaced.
You're not going through and replacing large swaths just because the truck or the assets are in place. All right? Smarter maintenance spend, smarter building of those grids. Very excited. A lot of new products. You know, Valmont's not just about that. It's about bringing new products. It's not just about those market growth, it's about bringing the products to that growth, let me highlight one of these. This is our hybrid distribution poles. You know, our business at Valmont has been large transmission poles. There's about a $3 billion market in distribution that Valmont hasn't played a big part of. That market mostly goes to wood. All right? Wood has a problem. Wood catches on fire, right? That's problem number one.
Problem number two, it requires a lot of chemicals, pretty harsh chemicals in order to preserve the wood for the long run. We feel there's a great market in this distribution, and we've really put a lot of effort into bringing new products into distribution, our concrete and concrete hybrid distributions. The making a product that's 6 times the strength of wood in a storm-hardened, environment, a fireproof environment, is critically important, and we've seen great leverage with this product. Just really a newer product for Valmont, but we believe this is a fantastic future. Our manufacturing facility in Fort Meade, Florida is manufacturing this today. We're very happy of, about the progress we've made.
This is an idea of bringing a new product into a market that was traditionally underserved by Valmont and really growing it with a new product demand. Fantastic product. Moving forward, looking at the lighting and traffic. You know, you looked, you saw the video at the beginning, kind of highlighted pieces and parts of this. When you are driving down the highway, you are driving either next to or under a Valmont structure, right? It presents unique opportunities for us in the IoT field, in autonomous driving, in all of these All of these technology enablement pieces, because we are there in the field, we are powered, and we are present. That's kind of a beachhead where Valmont sits today.
A lot of labor issues and assembly issues, a lot of labor issues in the field are prevalent for a lot of our customers. Anything we can do to pre-assemble, anything we can do to put technologies in it in our factory is a great value add for Valmont. Finally, I'd like to, when we talk about the lighting and transportation growth, I'd like to highlight a little bit about our EV charging side. We expect this business to grow to $1.3 billion. Part of that is our industrial vehicle charging. This is a newer product for Valmont. Industrial vehicle charging is a reality. I talked about the EVs going from that 1 to 31%. It's not only for commercial vehicles, it's also for industrial vehicles.
For people that are following the industrial vehicle space, the electrification of the space is also quickly moving. The critical part will be that there will be a need for $12 billion in capital spent in the next 7 years to build these structures. Valmont brings an interesting angle to these structures. We have a agricultural heritage that you just heard about today from my colleagues. That agricultural heritage allows us to do something unique in the industry, and that is really looking at the next generation of electric vehicles, and bringing those electric vehicles, that electric vehicle infrastructure onto the farm to help people understand and evolve there. Working with partners now, using our already deployed pantograph technology and structures on the electric bus vehicle stations to look into the future and bring them into the new electrified space.
Electrified on the farm will be a future theme that we'd like to call your attention to. We're happy with the growth in this. I think it'll be a quickly growing space as industrial EVs come to market. Valmont, once again, brings a unique opportunity there to our customers. Now moving forward, let me talk a bit about coatings. Coatings will, you know, last year was a $360 million segment for us or, sorry, a product line for us. We'll move to $530 million. Why do we like coatings? Coating's pretty simple, but as infrastructure grows, coatings grows. Once again, I talked about bringing technology to the customer. This is one of the things that our coatings group really excels at. You know, they're looking at the basic service.
They are offering what we call VCC MAX, a customer service that essentially when you drop your industrial loads off, you can track it through the processes of coatings and know when to pick it up. Really working on kind of that just-in-time idea for our customers. Also working at lightning service. Anyone who's ever dealt with outside coatings and everything else, having a same-day turnaround service is unique, and it's a unique opportunity for them to get the price to value that they're looking for. Our coatings product line is really pushing that forward. Remember, as those infrastructure needs increase, it doesn't matter if it's Valmont product that we're coating or outside, other industrials, we take all of those customers and bring them together. That business is doing quite nicely. Let's talk about telecom.
Telecom, obviously, when we look at a compounding growth rate, this is one of our outsized growers. We like the telecom business. We like about the telecom business is that we have great opportunities not only here in North America, we also have great opportunities internationally. We look at international carriers, we look at international opportunity, it's important. I'd like to speak a little bit about 5G. 5G. Our carriers, just in the U.S. alone, have spent $120 billion on 5G spectrum. That is a massive investment in spectrum. What that means is they have reserved that spectrum. They have yet to have brought forward all of the infrastructure it takes to use that spectrum. Right? It's like buying the beachfront property, but you still don't have the resort that you're looking for. Right?
The carriers have absolutely invested in that first piece of it, which is the spectrum. The second piece is really bringing that together. If you've ever used your 5G phone, right, and you get it, and you say 5G, and it's two or three bars, and then somehow it's worse than LTE. Has anyone experienced that? Right. I know I have. That's what we're talking about densification. That is the next step in what's gonna be happening here. The carriers will be spending, right? The CapEx, it runs and stops, the carriers will be spending on that densification. This is just in the U.S. alone. 5G is also a global business. We're very excited about opportunities in Europe, Australia, New Zealand, and Asia Pacific on what we're doing here.
Finally, I would just take a brief moment to talk about our Ericsson global partnership. Ericsson's a great partner. They don't wanna do what we do, we don't wanna do what they do. We bring the best together. Ericsson, with their new 5G radios, they're manufacturing in the U.S., and Valmont to actually help the structures and bring those to market. We're very happy with that partnership with Ericsson and our ConcealFab acquisition, which Avner will go a little bit more into detail on in a moment. You know, looking at small, innovative pieces that make a huge difference. If you're in the telecom business, a lot of people never heard of PIM. PIM is passive intermodulation.
What it does is that spectrum that they spent $120 billion on, it makes sure that that spectrum is clean, that there's no noise in the towers, right? One of the great pieces that we're rolling out, not only here in the U.S. but globally, is what they're calling PIM Shield solutions. If you're in the telecom business, it's a big deal. It's a big deal. There's a lot going on with that side. Drones, I don't know how many of you were in our investor day. I think it was well, with COVID, it was five years ago at our investor day. When you walked in the last investor day, we had a drone sitting in the middle of the room.
The drone was our very first movement in disrupting the inspection market. Drones will disrupt the inspection market as you see it today. Already, long-range drone inspections are 86% less expensive. Let me tell you what we're doing in that last 5 years. There's more structures out there, right? They're aging infrastructure. It's more important to understand what's going on, right? Valmont used that drone early on to fly into energized lines. One of the critical things, when your infrastructure, especially electrical utility infrastructure, is under stress, you can't shut that infrastructure down, right? Because if you shut that infrastructure down, that's where brownouts and all the rest of that stuff come from, especially in the summertime.
Valmont was the very first to start flying drones into energized lines, into an area of energized lines, to look at what's going on with that structure. They used to send people up in a bucket truck. I can tell you, watching guys at a bucket truck at 200 feet, I mean, I'm on the ground watching it. It's terrifying. It is an ESG issue. Guys try climbing telecom towers. It is an issue. It's scary up there, this critical infrastructure is going to change by using more and more drones. All right? Valmont, first one to fly an energized line. We were granted a national FAA BVLOS waiver. What does that mean? BVLOS means beyond visual line of sight. We can fly our drones. Sitting in this room, I can fly that drone in Nebraska without any issues.
The FAA has granted us the license to do that, one of the very few in the U.S. that has a national multi-drone license to do it. How did we get that? You know, how did that happen? Well, our team set up the very first inspections. We wrote the protocols. We've been working with the FAA, and we're working with a lot of educational institutions. In fact, in two weeks, June second, the NATE UNITE, which is a North America Telecom, they'll be flying drones on Valmont, you know, demoing all the new drones and drone technology. That BVLOS waiver allowed us to just fly a 77-mile line in Texas, where we just.
You'll see a video that we'll post online about a 77-mile flight where they flew in Texas just to do an inspection. That is a massive change. It will disrupt that inspection market. When we look at what this means for Valmont and what it means for our utility and infrastructure customers, not only is it a cost savings, but if we look at life cycle extension, Valmont's unique right to win in this space is not that we'd be a great inspection company. There'll be lots of inspection companies, but we will be able to couple our inspection with our product in the field and offer not lifetime, sorry, life extension of the product.
When we look at warranty, we look at life cycle management, and you add these services and products in, that's what the future is gonna look like here. It's a tremendous opportunity. Finally, AI. I've talked a lot about AI and specifics to flying a line. When I'm doing a 77-mile inspection over a line, AI plays a critical part of it because it brings my cost per mile down. AI gets smart. It will tell me when I have vegetation encroachment. You guys remember California, the fires there? The fires in California were from this. Right? That's where it starts. Now you're looking at these things adding real value and real growth. Life cycle management will be a future here, so critically important to Valmont. Solar. Fun fact about solar.
I was reading an article that mentioned that in order to meet the mandates that are out there, the total land coverage of solar fields will need to be Massachusetts, Connecticut, and not to be left out, Rhode Island. All three of those states would have to be covered in solar fields. Okay? When you start talking about dual use of fields, you start talking about understanding what agriculture you can use with the fields. That'll be important. Valmont is once again right in this area. Let me tell you just really quickly about trackers. Trackers' cost of goods, it adds about 10% more. Trackers follow the sun as it goes across the sky. 10% increase in cost of goods, a 25% increase in production of energy. That's the future. Not fixed, trackers. 25% pickup.
When you're talking about land and land mass and properly utilizing that land mass, this is a critical technology for that in the future. Today, that's where most of the growth comes from. Real quick on the outlook and goals. We talk about the projected sales grow $1.5 billion. Digital and tech revenue sales are 5% of that. When I talk about the drone business, making dumb infrastructure smart and the monitoring side, our goal is to get 5% of sales in that category, which again, which is high quality of earnings. When we look at the growth, this is broad-based across the business. Once again, not only do we have great tailwinds on the infrastructure side, Valmont bringing new products, new infrastructure products to bear is important part of that as well.
Just real quick on the international markets. What I love about our international markets, every geography is different. The need for every geography is different. Having the breadth of infrastructure portfolio that Valmont has, our local leadership gets to pick and choose the products that work for that region. We follow the market with the product. That's the fun part about our international and international growth is that we'll be picking and pushing different products around the globe. We're fortunate to have such a breadth of portfolio on this side. Finally, you know, you know, I'll close just saying, look, this is an exciting business. I'm happy to be here. No one has seen the level of infrastructure build-outs and the pieces that we're talking about since the New Deal.
It's been a long time since there's been this kind of infrastructure tailwinds pushing the market forward. It's been a long time since we've had a meaningful energy transition. We're right in the middle. We're in the early innings of this transition. We're in the early innings of this new energy super cycle. We're happy to be here. We have a fantastic team. Our infrastructure team's energized. They're excited to be a part of it. I think it's just a lot of fun to be in this business. I appreciate your time. I'll now turn it over to Diane, where she's gonna talk about building and manufacturing all of these pieces and parts.
Thank you. Hi, I'm Diane Larkin, the Executive Vice President of Global Operations. As Steve mentioned earlier, I've been with Valmont for three years. I spent my earlier career as a commissioned officer in the United States Army for 10 years, followed by over 25 years in ever-increasing roles of responsibility in global operations. I am excited to talk to you today about our strategy to accelerate growth and optimize our operations through operational excellence. Before I do that, I'd like to take a moment and thank our entire operations team for their strong performance over the last three years. They did this in the face of extreme volatility, COVID, supply chain disruptions, the Ukraine war, and more, all while supporting a growth of $2 billion and not adding any significant brick and mortar.
After all of that, we are confident that we can overcome any of the challenges that we may face in the coming years. What the team has presented today is that we are planning for significant growth, and we're already experiencing this significant growth. What you'll hear today is that we are well-positioned to support that growth by leveraging operational excellence to accelerate through our capacity levers. We've enabled sustainable outcomes through our strategic priorities and cultivated a culture of continuous improvement, which drives optimization and efficiencies. Further, we're leveraging a centralized organization structure to accelerate scalability as well as foster cross-site collaboration and global best practices. These provide for a growth advantage. Lastly, we're driving operations transformation through innovation and technology, expanding capacity and improving productivity.
This transformation aids in our ability to attract and retain the highest caliber of talent, skilled both in lean leadership and digital acumen. We are doing all of these things while ensuring we are good global citizens and enhancing our customers' experience. We are building capacity to ensure volume growth. We understand that to increase capacity, we must consider each of the capacity levers that can constrain growth and manage solutions that not only address those constraints, but also creatively leapfrog us to solution sets that posture us for a future that includes grid electrification, grid hardening, green generation, food and water insecurities, ever-increasing climate events, and more. We acknowledge that labor and talent are at a premium, and we know that addressing shortages in the traditional manner no longer sufficient.
We must become the most desirable employer and shift our manufacturing to cutting-edge technologies, not only to lessen our dependency on labor, but also to attract newer generations to our factory floors. We're investing in additional machinery and innovation in Industry 4.0 digitization to optimize our existing assets. We use lean techniques to create material flow and pull throughout our entire value chain. We realize that we need to be in the right geographies to service our markets. We have a flexible global footprint that enables us to get more out of that footprint while allowing us to pivot when faced with big changes, like volume fluctuations, FX, geopolitical volatility, and other yet unknown challenges.
We optimize our systems in conjunction with that flexible footprint, to get the most out of that footprint, like rationalization to mitigate, to mitigate complexities, like the use of a universal EHS and quality systems, as well as streamline logistics systems. We are implementing digitization to better manage our supply chain. We can't grow if our supply chain is not growing with us, so we are investing in the systems and tools that provide early risk detection, spend analytics to leverage volume, and identify strategic priorities. We focus on these operational pillars to ensure growth. This focused approach also ensures continuity of services and supply for our customers. Our products are mission-critical, and we are uniquely positioned so that our customers can always rely on us as the supplier of choice.
Our strategic priorities focus on solving customer challenges and ensuring that our businesses can go to market. We use technology and innovation to solve for machine repeatability and uptime, as well as labor scarcity via robotics, and ultimately providing additional throughput and capacity. All of this effort and investment directly ties to shorter lead times for our customers, as well as superior quality products. We're driving optimization to also create capacity as we review our strategic footprint to ensure scale and agility. We optimize our supply chain also to ensure product availability. Using our assets in a most efficient way also allows us to continuously reduce our carbon footprint. Enabling our ability to succeed on all of these priorities is our centralized organization design, which allows for speed, communication, and scale, and developing and attracting talent skilled in lean and data acumen.
We also focus on creating a culture of excellence, which elevates our thinking and vision to world-class levels and also fosters a continuous improvement environment through grassroots empowerment, education, and resources. In short, sustained outcomes of shorter lead times for our customers and superior quality enables our commercial partners to garner value-based pricing. The fact that we're using our existing assets increases our return on invested capital. Centralizing operations enables standardized processes, which enables us to share talent, supplier inputs, and best practices. This combination drives scalability across the globe. An example of this is our more recent integration of our solar businesses. By unifying the shared services of our agriculture business and utility businesses, it allows us to consolidate warehouses in Brazil, share suppliers, steel suppliers and galvanizers across Europe, as well as absorb specialty talent within our global sourcing team.
These enhancements drive improved service and profitability for both of those businesses that we serve. We aim to be the most desirable employer in each of our functions and markets. This starts with attracting, retaining, and inspiring our employees. This is essential to our corporate goals as respect for the individual is a core tenet of our core values as defined in integrity. An example of respect for the individual is listening to our employees and acting upon their input in a tangible way. We're continuing to invest in upgrading our facilities to enhance the work environment, but also in innovation and Industry 4.0 to enhance the work experience. We strengthen our connection with our employees through our employee resource groups. We provide this vehicle to ensure diversity and inclusion, but also to inspire a Valmont affinity, a sense of belonging and of being valued.
By modernizing our facilities and transforming with Industry 4.0, we are attracting individuals from newer generations. Staying current with demographic shifts has allowed us to target new technologies, like in computer programming and, as Daniel spoke of, AI, and not just focus on traditional welding. This also allows us to rely on less manual labor, which continues to remain scarce. How does an organization mature from its strong foundation of lean and use its deeply rooted core value of continuous improvement to springboard to the next level? How do we achieve that culture completely embedded in this mindset, and why does it matter? Strong leadership plus solid processes equates to successful results. Strong leadership plus solid processes steeped in a lean culture equates to sustained successful results.
The foundation of the lean culture starts with results, but not just good ones. The goal of achieving world-class levels, therefore, a focus on continuous improvement is essential. The systems and processes created and improved upon are rooted in a systematic data science as well as data analytics, engineering, technology, as needed. Educating our workforce in these tools, and skills is critical. In addition to setting world-class goals and training in systematic problem-solving, we are also measuring ourselves on cultural enablers. An example of a cultural enabler is engaged leadership. How often are our leaders walking the floor, communicating with our employees, and, ensuring that we are providing them that opportunity and a voice, showing respect for the individual by sharing information? We are teaching our leaders what engaged leadership looks like and developing them with the tools required.
In addition to engaged leaders, we strive to empower our employees, give them a voice and a vehicle to use it, have more grassroots-driven initiatives, provide a means to connect with the community to enhance their personal satisfaction. Empower the employee to actually stop a production line when there is a safety or quality issue, that is true empowerment. Measuring ourselves in these areas is powerful and lets us know that we are progressing on our lean journey. Again, sustained successful results grounded in our core values, which starts with passion for our products and customers, is our goal. As Steve mentioned, earning customer approvals to produce at a new facility is not guaranteed and is also a recognized barrier to entry. We are expanding existing sites to not only fast-track additional capacity, but also increase return on invested capital.
An example of this capital investment is an expansion of one of our U.S. locations by adding an entire large pole production line, which includes a large press brake, three seamers, a robotic base welder, and 34 fit weld stations. This supports both the transmission markets as well as the large lighting and transportation pole market and supports $110 million in additional revenue. We are investing in factory of the future technology that involves robotics and digitally connected machinery, as well as exploring newer opportunities in the areas of projection technology and autonomous welding. All this is really exciting. This is the fun stuff we do in operations. The real reason we are transforming manufacturing is to equip us to better respond to our customer needs. We also improve our ESG posture by reducing energy and waste while enhancing safety features.
All of this improves cost and productivity as well as reducing inventory, which I think that might get Avner a little excited, but ultimately provides superior quality products in less time to our customers. As mentioned earlier, we need to support an additional 25% to 30% volume growth. We're doing this by leveraging lean and technology to provide targeted process improvements, increase productivity, optimize lead times, and improve sourcing. We do this to deliver sustainable outcomes and enhance customer experience. An example of this is a series of lean events that we conducted to improve our shipping performance in one of our irrigation sites. We were experiencing significant demand increase, we needed to increase our output.
This series of events allowed us to streamline our processes by eliminating waste as well as redesign an entire crate line and reflow our entire parts picking process. The outcome of that was a 30% improvement of our output rates. It also reduced overtime and improved our employees' quality of life. An example of increased productivity is our deployment of cobots. These are basically collaborative robots that are designed to work side by side with people. They are faster and also address ergonomic challenges that we have. They are perfect to use in repetitive processes that don't require specialty skills, and it also allows us to redeploy our highly skilled employees to more complex and highly value-added processes. Connected factory of the future activities optimize lead times by connecting our machine information.
The long-term vision is we can scan an order at an upstream process or machine that begins producing and then continuously monitors all the key parameters and alerts our operators, support staff, and leadership whenever there is a key issue. This alert happens in real time, allowing us to decrease machine downtime as well as decrease any production interruptions. This is all cloud-based and compatible with all of our main systems, and we're piloting this in two locations today. Improving sourcing is critical as supply chain has become more volatile and has been disrupted. Therefore, we're digitizing our supplier relationship management, which enables risk mitigation, profitability, and data to quickly orchestrate supplier development, strategic sourcing projects, auctions, and consolidate suppliers to better leverage our volume and specialty products. Conserving resources and improving life is at the heart of our sustainability initiatives.
As we design new facilities, we are purposeful about ensuring we are designing in both environmental and safety enhancements. One example is our new spun concrete facility in Bristol, Indiana. This site produces low carbon transmission poles and is 100% electricity self-sufficient via a 500 kilowatt solar array field installed for this specific purpose. Additionally, we're adding silos to incorporate a proprietary blend of eco-concrete that has proven to reduce CO2 emissions by 50%. This is just one example of how we continue to be leaders in sustainability across our communities. Corporations often declare world-class operations as their vision, but it's not often that an understanding of what that means and what world-class looks like. At Valmont, we are working on our journey from good to great.
That starts with setting the right vision and ensuring we are aligning our goals with greatness. We are proud of our results, and we have opportunities to improve. In general, we are performing in the top quartiles of the majority of our metrics, and we continue to understand what our opportunities are across the board as we continue to transform into a world-class operations. In conclusion, we are well-postured to support significant growth via operational excellence and our strategic investments. As we've demonstrated over the last three years in a much more volatile environment, we can drive results.
Now, in more stable times, we can actually focus on optimization. We use enhanced operational excellence and lean manufacturing to enable optimization and efficiencies. We are focused on attracting, retaining, and developing talent that specifically enhances our grow and transform strategies. Advanced manufacturing, engineering, and technology drive sustainable results and continuously evolves our innovative culture. Thank you for your time today. I'm going to pass over the presentation to Avner, who's going to highlight additional investments and continue on our theme of return on invested capital.
Thank you, Diane. Good morning, everyone. For those who I've not met yet, I'm Avner Applbaum. I serve as a CFO for Valmont. I joined roughly three years ago on the onset of the pandemic. Almost all the events were virtual. Excited about the opportunity to be here with you in person, share with you some of our past successes, our financial framework, and our strategy for the future. As I mentioned, I joined Valmont during a very volatile environment. In spite of all the uncertainty and the headwinds caused by the COVID pandemic, we've been able to successfully navigate through all the macro challenges. In fact, we thrived. We achieved record results. We drove significant shareholder value. As we look forward, I'm confident in our ability to continue to drive financial success for the company.
You heard throughout the morning the ambitious growth and transformation plans from our business leaders. What I want you to take away from today's presentation is a deeper understanding of our focus on a more resilient business model with higher quality of earnings that creates shareholder value. Our discipline and balanced financial framework supports these strategic goals of generating sustainable long-term profitable growth. Our strong balance sheet and cash generation are key foundational elements allowing us to meet and exceed our five year financial targets. We're also committed on bringing disruptive technologies and products to a growing range of geographic markets through thoughtful organic reinvestment and strategic M&A.
Our growth, which is increasingly driven by stream of high value, resilient revenue, generates strong cash flow, which allows us to execute on our balanced capital allocation framework of investing in high growth and transform initiatives while steadily returning capital to our shareholders. We have a proven ability to grow in all economic scenarios, and we're poised to continue this sustainable, profitable growth. Since 2019, we increased our sales by more than 50%, we enhanced our margin, and we doubled our earnings per share. We've done this through many macro challenges, such as COVID lockdowns, supply chain disruptions, hyperinflation, labor scarcity, and more.
We've been able to achieve these results through many areas, such as organizational structure, our disciplined business model, portfolio rationalization, our decisive actions around pricing, operational excellence, and our deep commitment to our core values and intense focus on areas that create value. Going forward, we'll rely on these guiding principles and our decision-making framework to drive consistent performance, enabling us to sustain profitable growth in years to come. Here's a quick summary of our stock performance over the last 15 years, demonstrating long-term track record of shareholder value. Our shareholders have been rewarded with superior returns in nearly all historical period, especially in the last three years, through our shareholder value creation model and the decisive execution of our strategy.
We have consistently delivered our financial results in line or ahead of expectations through our resilient business model that sustains performance through macro challenges and the ups and downs of industry cycles. Most importantly, we're not resting on our laurels. We're strengthening our competitive advantages. We're confident more than ever in our future prospects. Turning to our balance sheet and liquidity, we're on solid financial foundation. Our balance sheet demonstrate the resiliency and the execution of our strategy. Total debt to adjusted EBITDA is around 1.7 times, which is at the lower end of our desired range of one and a half to two and a half times.
We have no significant long-term debt maturities until 2044, and the long duration of their debt actually provides us with near-term flexibility. We're highly focused on an investment-grade credit rating. Our strong balance sheet and ample liquidity supports our strategic goals and provides us with flexibility and resiliency to withstand future challenges. Our robust cash flow generation is a key fueling element of our long-term strategy. Our goal is to achieve free cash flow conversion of 1 times net earnings through this cycle, which will fund all the Grow and Transform initiatives you heard throughout the day and will drive long-term shareholder value. We have a proven track record of generating strong cash flow over a multi-year period.
Over the last four years, we generated more than $650 million of free cash flow despite the disruptive impacts of COVID-19, especially in 2021, through many of our initiatives, such as inventory management, supply chain optimization, our digital business platform, automation solutions. All those drove working capital improvement despite all the impact we've seen from COVID, such as hyperinflation and significant supply chain disruptions. Also, our digital solution are inherently less working capital intensive. As we continue to execute on our strategic initiatives, we're confident in our ability to drive sustainable long-term cash flow growth and drive consistent value for our shareholders. Our capital allocation policy is our strength. Our disciplined capital allocation deployment framework underlies our growth strategy.
We aim to create a balance between investing for growth, preserving our balance sheet and liquidity position, and returning capital to shareholders through growing dividend and opportunistic share repurchases. Since 2020, we deployed roughly $1.1 billion of capital with approximately two-thirds reinvested in the business and one-third returned to our shareholders. Our highest priority is to reinvest in the business followed by acquisitions, which drives the greatest value creation and the highest returns for our shareholders. I'll provide additional insight into our investment approach in the upcoming slides. We'll continue to reward our shareholders through share repurchases and dividends. On dividends, we're committed on increasing our dividends over time as a function of earning growth, which aligns with our strategy of steadily increasing our returns for our shareholders.
On share repurchases, we will maintain an opportunistic approach based on cash flow generation and the assessment of the intrinsic valuation versus other investments to maximize the risk-adjusted returns. In summary, we're maintaining a disciplined and balanced capital allocation policy driven by ROIC with the ultimate objective of value creation. As I just mentioned, our highest priority is to reinvest in the business to drive organic growth, and we balance those investments across our Grow and Transform initiatives. Over the next several years, as you can see here, we're planning to increase our investments in technology, which will support the high-growth markets that you heard throughout today. It will accelerate our innovation, will drive improved productivity, and address labor scarcity. We have a rigorous budgeting process in order to optimize investment to support our growth priorities.
We had several meaningful investments over the last several years, and we have a really strong pipeline to support the growth transform strategy. Some examples include our recent investments in Brazil and Dubai, where we actually doubled our capacity, and it supported the robust agriculture growth we've seen in previous years. Diane mentioned to you about our U.S. pole operation, and we have an exciting opportunity there to increase our capacity by roughly 10%. On the digital side, Aaron mentioned to you our Valmont Coatings Connector, our VCC MAX, which is a customer communication solution. That solution provides real-time insight into our coatings process and actually an individual order status. That solution was a main contributor, increasing our Net Promoter Score from 16 in previous years to an excellent 58, which is significantly better than industry benchmark.
Finally, on the aftermarket strategy that Josh shared with you earlier, we're planning on investing on an e-commerce solution, which will support that growth. It will improve our customer experience and will drive efficiencies. In summary, we have a strong pipeline of future opportunities, future reinvestment opportunities, which will expand our capabilities, our capacity with high return on invested capital, and will ultimately deliver against our growth plans. Well, we'll continue our growth and transformation journey through one strategic focus area, augment growth by accelerating innovation and growth in strategic adjacencies through acquisitions. We have a very good pipeline of acquisitions, and we assess these future acquisitions with clear strategic filters and financial criteria. We employ a rigorous due diligence and integration process to ensure that our return on invested capital will exceed our cost of capital by year three.
Our goal strategically is to enhance our portfolio, expand our addressable market through technology and capability expansion, and to invest in global and high-growth businesses. All of these acquisition must align with our Grow and Transform framework to support the long-term growth. We balance these strategic filters with a very strict financial criteria to ensure that we will achieve bottom-line profitable growth and returns. We also have proven a ability to integrate these companies, which will typically drive synergies both on sales and on the operations side, which maximize our financial returns and improve our resiliency. Let's take a deeper look here at some of the acquisitions we completed over the last five years, which supported our outstanding value creation and our strategic objective. We have a strong history of acquiring quality companies in both agriculture and infrastructure segments.
As you can see, most of them here do meet multiple strategic filters. Some specific examples of our deliberate focus on high growth, portfolio enhancement, and capability expansion include Larson, Connect-It Wireless, and ConcealFab, which are supporting our telecom market, Solbras and Convert Italia, which supported our advancement in solar. These acquisitions had meaningful contributions to our sales and earning growth. Finally, the Prospera that Daniel shared earlier today, it is perfectly aligned with our transformation journey. It strengthens our addressable market, it provides future growth with less cyclical recurring revenue. The integration of the company has gone very well, we're really excited about the future growth. Here's an example of the ConcealFab acquisitions that Aaron mentioned earlier today, which has a complete alignment with all of our strategic filters. It's a technology leader.
It supports the telecom market, which has experienced high growth due to the driven by the technology inflection with the rollout of 5G. It enhances our portfolio of telecom solutions. It provides access to markets and carriers around the world and expands our partnership with industry leader. It also leverages the unique place Valmont has in the communication industry, our engineering expertise, and our global manufacturing footprint. We're also reaffirming our 2023 outlook, which we provided during our Q1 call on 21st April . In summary, we're forecasting sales growth of 4%-7%, which accounts for the divestiture of the offshore wind business, mid to high single-digit volume growth, about 1% of price growth with no material impact from foreign currency. We are also expecting operating margin expansion based on our strong market demand, our pricing strategy, and continuous improvement initiatives.
Expecting adjusted EPS growth of 12%-16% or $15.45-$16.00. We're confident on the outlook based on the strength of our portfolio, favorable end markets, and the strong competitive position in the marketplace. As Steve mentioned, we're announcing our new five year financial targets based on the positive outlook of the end markets and our ability to execute on the Run, Grow, Transform framework. Our strategy is working. We're focused on execution, and we're confident in our ability that we can achieve these goals. We're expecting 5%-8% of organic growth, which is demonstrating the strength and resiliency of our core business and our Grow and Transform initiatives. We do acknowledge, as we mentioned earlier today, we do acknowledge the influence of the ag cycle on our sales growth. Our diversified portfolio mitigates the impact compared to previous cycles.
Our growth trajectory remains resilient and less susceptible to fluctuations we experience in the path. Our Josh and Steve and Daniel will cover that through much of the Q&A. Our acquisitions do remain an essential part of our growth strategy with a potential to contribute to our overall growth over time, but we did not model them since the timing and the overall contribution is hard to predict. Our team is focused on taking that sales growth, converting it to EPS growth of 12%-15% and operating margin of greater than 14%. The strategic working capital initiatives I shared earlier today will enhance our cash flow, allow us to achieve our goal of 1 times net earnings, and to achieve return on invested capital of greater than 18%.
I will provide additional insight into the ROIC and operating margin targets in the next few slides. We're focused, we're confident, we're prepared to achieve these goals. As I just mentioned, we're planning to deliver profit margin greater than 14%. How do we achieve that? Through two main areas, volume growth and the Valmont actions. On volume growth, we're getting significant portfolio momentum from the underlying market growth that we shared with you throughout the day. We're also getting the high growth and high margin businesses are growing as a percentage of the overall mix. Both of those will contribute to significant part of our operating margin improvement. All the actions that we are taking, the Grow and Transform initiatives, they will contribute to higher margins as we add these higher margins and product services into our overall portfolio.
Over the last several years, we're getting significant momentum from operational excellence, digital transformation. We've all seen that in our Q1 results with a significant improvement already in our operating margin. We're working on our shared service structure optimization. We continue to take a strategic emphasis on our pricing leadership. We will accomplish all these goals while we continue to invest in R&D and innovation. We continue to plant seeds for our future growth. We are confident in achieving this goal based on the initiatives we already have in place and the initiatives we're going to come in the future. Okay, you heard throughout the day of our clear strategy to capture high growth opportunities and to drive higher ROIC.
The ROIC, the growth in ROIC is underpinned by three main drivers: operating margin expansion we just covered in the prior slide, our high-value customer solutions, and improved capital efficiency. In the operating margin expansion, we'll benefit from scaling our business. We'll leverage our central function, operational excellence, and one of the key drivers is our pricing power, which drives significant ROIC. Our Grow and Transform initiatives, so as we co-covered, we're focusing on high-value and technology-driven solution. They will have lower working capital intensity. Finally, we're focused on improving our improving our capital efficiency, which includes the working capital management, our asset utilization, and portfolio optimization.
We have a clear line of sight, and we're well-positioned to deliver greater than 18% ROIC by 2027. Throughout the day, we emphasized our focus on a resilient and profitable business model that creates long-term value for our shareholders. Our disciplined financial framework supports our Run, Grow, Transform framework and enables the profitable growth in line with the overall strategic objective. We'll continue to bring disruptive products and technology to our markets through organic reinvestment and strategic M&A.
Our strong balance sheet and capital allocation framework are key enablers to achieve our five year targets, and we have a clear path to achieve our financial targets by executing our strategy, which remains focused on delivering ROIC and margin improvements. To sum it up, our intense focus on resilient and profitable business model sets the stage for compounding long-term value for our shareholders. Thank you. Look forward to many more discussions with you. With that, I'll turn it over to Steve for his closing remarks and before we go into Q&A. Thank you.
Okay. Thank you, Avner. Again, I wanna thank you for participating in our Investor Day today, and I hope you came away with these five key takeaways. You know, first and foremost, we have an enduring business foundation, model, and strategies for the future that will help us to continue to compound and outperform the market. We hope you got a sense of what Run, Grow, and Transform means for us and the way we allocate resources and capital across the organization, and that we are doing so in a very disciplined manner. That we're leveraging technology and innovation and bringing it forth to generate revenue as well as to help us to operate and increase margins internally.
We're continuing to focus on ESG and sustainability across the organization. Lastly, that we're delivering growth, significant growth with high returns on capital as well as operating margins that will help us continue to drive EPS ultimately. I wanna thank, especially today, Renee Campbell and Jordan Hansen from our team, who did a lot of the legwork to create this event, as well as Corbin Advisors, who helped us with the material generation and preparation. Again, with that, I'll ask the team to come back up, and we'll answer your questions and then break for lunch.
All right. We'll give the team just a moment to assemble and get a microphone up here. Also, just another reminder, if you joined the webcast a little bit later, if you wanna ask a question online, there's an Ask a Question tab in the upper right-hand corner of the video player.
You guys have the mic, so..
Okay. Let's go ahead and open it up. We'll start, Nathan, with you, and then we'll go to Brian, and then we'll go to John. Sorry. Wrong side, Christine.
I want to start off with a manufacturing question. 84 manufacturing facilities for $4.5 billion seems like quite a lot. Is that the right number of facilities to have? Are there things here that are subscale that could be consolidated? Is that the most efficient structure to have?
I'll start off with this. You know, 33 of those locations are galvanizing locations. As you know, that services a, like a 200-mile radius. Also there's probably 12 locations that are associated with our access systems business, which we are looking to divest. If you look at the remaining facilities, all of those facilities are typically medium to large size. Because of the way stimulus money works around the world, some of it does have to be local for local, and therefore the corresponding plant structure that we have in place.
Yeah. I guess more than half of them being galvanizers and access systems takes a lot of that out. I'm gonna ask the Nucor question, 'cause you're, you know, I'm getting it from a lot of investors. They're clearly coming into the utility pole business. Can you talk about what you think that means for the long-term competitive dynamics in that business?
Aaron, I'll let you answer.
Yeah, sure. Yeah, Nucor entering the business, obviously, Nucor moving in. You know, There's two pieces of the utility business that I've worked through that are critically important that I think that people don't emphasize enough, and that's, number one, the engineering side of the business. There is, of course, different classes, different sizes of poles and different engineering that goes into it. Valmont takes a high end on the engineering side, highly engineered structures. Also with Nucor, we don't think about our business as a steel business. We are a multi-material business.
When we go work with a utility to design a line, we don't design a line just for steel, we design a line for concrete, we design a line for composites, we design a line where we can bring hybrids of that in together. Nucor entering the business is a part of the business, yes. It's a growing business, as I've brought up before. When we look at line design, when we look at how we're actually servicing the customer, we think of a lot more than steel. We think about all of our materials.
Frankly, I would add, we'd rather have disciplined competitors that understand also value-added pricing. Nucor, where they have vertically integrated before, have demonstrated that. It's nothing to fear. I think what they're seeing from the long-term drivers in the market is exactly what we are saying here. We're on the beginning of a super cycle, as the energy transition kicks into place. Thus, while they're gonna put a fair amount of capital into that line of business. It just reaffirms our own thesis.
Brian. Yeah.
Thank you. Just to build on Nathan's question really quickly, Nucor got into the business by acquiring, right? They're not coming in greenfield, they acquired Summit. It's a competitor that you're familiar with, they'll be investing in it more, I guess.
They bought a facility, in Pennsylvania, and they've said that they're gonna add 2 greenfields.
Okay
.Cl ose to their existing steel operations. I think the first one is planned to come on at the end of 2024. Still a little ways away before that happens. You know, greenfields are tough. Just because they build it doesn't mean it'll get approved by utilities unless, you know, there's a compelling reason to do so.
Okay. Then I just had a question for Aaron too.
Yeah.
Steve, we talked about this a little bit about the 5G opportunity and specifically in small cells.
Yeah.
You talked about the PIM solution that you have.
Yeah.
I know that small cell sites, I guess, are supposed to start to be built out in earnest in 2024 and 2025 and beyond.
Yeah.
Millions of them, potentially. I'm wondering, can you talk about, maybe the dollar content that Valmont would have in a small cell with the PIM solution and other technologies that you have?
Sure
What kind of share? I'm obviously trying to figure out how big the revenue opportunity is for you specifically in small cells.
In small cells specifically. Yeah, we don't. Specifically breaking out what we're gonna make in small cell depends on the size of the structure, right? It's gonna be hard to pin down exactly what our share would be structure by structure. The way that business works is that we get, usually a municipality will work and they'll come up with a design or a series of designs that they like, then pass it on to us for assembly. ConcealFab, what's interesting about ConcealFab is not only are they doing the structure on the outside, they'll also do some assembly on the inside of a lot of the small cell structure.
We believe it'll be a considerable growth part of our telecom business and particularly accretive to our margins. That's what I would say about small cell in particular. I'll also say this, because the carrier CapEx, you know, question comes up quite a bit too. Our engineers are busy, when engineering gets busy, then we're looking pretty good. As long as the engineers are moving, we know that the market moving and that there's CapEx plans out there.
John from D.A. Davidson.
Thank you. With the very wide spread of initiatives across utilities to spend on the grid, how are you approaching who you select as your customer considering your level of capacity? As a second part, I guess, what does that evolution of capacity build look like between now and 2027?
Well, on the customer side, you know, we've been in this business for a long time, and there's, you know, we have great relationships with a lot of the IOUs, the investor-owned utilities. Really the largest players in investor-owned utilities are our partners. We obviously prioritize a lot of those large players. You know, when you have those long relationships, there becomes a conversation about what value you really add. What we do is we work with the customers where they understand our value and are able to price accordingly. For us, that's really important. I mean, as we all know, not all customers are created equal, right?
We look at a lot of the IOUs and partners that we've done business with for a long time, to sit down and have honest conversations about value and price. We spent a lot of time and a lot of work working on our price advantage and the value we bring to those customers. When you can exhibit that value over time, that discussion becomes a lot easier. Does that answer your question?
Yeah. Just, you know, the follow-up regarding capacity.
Yeah
you know, you showed a lot of initiatives.
Yeah
With the CapEx numbers.
Yes
what does that, capacity build look like,
Diane will answer that second.
Right. I'll take some of that.
Thank you.
As Aaron said, we have a lot of different types of products. I highlighted an expansion in the steel space, which is where we're probably got the most growth coming. As well as we know that we have future expansion projects, we also look at the other products. We look at composites, we look at aluminum, we look at concrete. You know, we're not just in that steel space. We're not overly constrained in every single one of those different materials. Where we are, we've got targeted expansion projects to close those gaps.
Thank you.
Ryan, do you have a question? Yeah.
Yeah. Just to actually follow up on that response you just gave, Aaron, regarding price for value in the utility space.
Yeah.
Most of these projects go into rate base, and so they're subject to PUC and even FERC.
Yep
Approval. I mean, how does that play into the price for value concept? Are you having to prove those concepts to the commissions and to the consumer advocates, or does that all happen at the customer level? I'm just curious, any color there.
Yeah, it happens at the customer level. What you gotta understand about utility and base infrastructure for that is it is not only quality is everything. If you have a blackout or a brownout or everything, anything like that, you know, the governor of your state will get called in under 5 minutes. It does not take long. When you wanna talk about track record of performance, that's important. Delivery. Will your delivery be there on time? Do you have a track record of engineering over 50 years of making sure that these structures actually can go the distance? When you have that credibility in the market, that's the value. That's a big part of it.
Finally, what Diane's done with capacity and productivity as this business is growing, the capacity and productivity behind that is another critical piece. Those are really important. You gotta understand when an infrastructure becomes a political issue in under five minutes, believe me, they care. They really care to make sure that that infrastructure is in place.
Ryan, I would just add too that we're typically only 10% of the project cost, but we can cause the other 90% to be way over budget if we're late, there's a quality issue, union crews are waiting to erect, or they're on the right of way for longer. I think that's how it's sold by our customer to the regulatory agencies. You know, they're just in it for the overall project cost. Because we bring a value of on time, no problems, there when they need us, it really mitigates their cost on the overall project over, you know, as you go through the time period.
Thanks. Lastly for me, you know, the presentation's been obviously very upbeat and that's understandable given the forum. This is sort of the keep you up at night question, Steve. I mean, if we're back here in five years sitting in this room and things didn't quite meet the objectives, what do you think is the most likely reason why that might be? What are the things that you think are the biggest risk factors you're watching?
Well, when you look at, you know, severe economic shock, something that would cause budgets to get rerun and redone. Where we think we have certainty around some of the funding mechanisms over the next decade, if those were to change, if, you know, we really got into hyperinflation in some of the areas we serve, that could impact it a little bit. The nice thing is it is broad-based, and it's not any one area that we have to concentrate on the, "Hey, we have to grow to get there." If we had to rely on just one area or one product line, I'd be much more concerned. I'd say the other part, which I feel very confident in but I'm always attentive to, is execution, right? The team having to execute and continue to execute.
They've demonstrated that, but that's never a given, and it's something you always have to watch. That's the way I would answer your question.
I'm gonna jump to the online. We've got a couple of questions that have come in. This one is for Diane and Avner separately. Can you share with us your experience using lean thinking in transactional, i.e., back office and carpet land areas like HR, accounting, talent development, and acquisition integration?
Yeah, I'll jump in and say a few words about that. As you probably know, Valmont's adopted Agile as its transactional Lean platform. That's the platform we apply to things like back office, accounting, HR, and those types of initiatives. We used it most recently to drive our project to improve our working capital. Definitely we have a proven platform that gets results.
Yeah. I'll add into that. I'm really excited about the opportunity to really improve the back office through a lot of the Lean and technology and automation, kind of the journey towards, you know, touchless to instant using significant data science and automation. There's so many opportunities in that area. As a company, we really embraced kind of the digital IQ, having every employee understand the capability of technology to improve their job, make their job more interesting, more effective, work less on the transactional part and more on the value add. We put a lot of that work in finance, specifically using data science on the financials, on forecasting, understanding when a customer might leave so you can take proactive actions.
That's what the employees are more excited about working about those initiatives, how they can drive value, how you can if a customer's not going to pay you could use now automation and data science to give you some signals and warnings. I think there's tremendous opportunity. We started our journey. We made significant progress across the organization. I'm talking about finance, but we've done that also in operations and HR. I'm actually looking forward, and that will be one of the enablers for us to get more profitable and drive improvements.
Thank you. Brian Wright.
Thanks. On the,
Brian.
The other Brian, sorry.
The other Brian. Brian, Roth Capital.
On the, on the CapEx side, there's a $20 million earmarked for agriculture aftermarket and digitization. I was hoping you could maybe kinda delve in some of the details on kind of the top priorities within that.
Sure. Sorry. As I mentioned in my presentation, we really took a holistic look at our aftermarket business and really wanted to drive out transactional friction. We wanted to make ourselves easier to deal with. We wanted to improve our speed to the end growers. Based on that, we've embarked on a digitization effort of, you know, all the processes. There's an e-commerce platform as well as, you know, upfront ordering as far as shipping, being able to track and have ETAs online so that those dealers and growers can figure out where things are coming from. As I mentioned, when a machine breaks down, the time to get that machine back up and watering again is very, very mission-critical for our global growers and our dealers.
We felt like digitization was the best option to drive that performance.
Thanks.
Yeah. Thank you. Behind ye ah, right there.
Hey, guys. Pricing has driven a lot of your sales growth in the last two years, and with last year, I think it was almost 20%, was particularly strong. Can you talk about how much price of that 20% was from mix and how much was from commodity price-driven inputs, and then how Valmont plans to maintain and build off of that going forward?
Yeah. overall, to your point, right? As a company, we really had significant growth, sales growth over the last several years. And on the pricing side, specifically, we've seen over the last several years a really increase in steel commodity. And we both increased our pricing on all product lines based on the value we can provide to our customers. And there are specific mechanisms in, mostly in the T&D business, where really, we have an index that based on that index, we modify our pricing up and down. I'd say that overall across the portfolio, we continue to take pricing actions to increase our pricing and provide value to our customers.
I think the point is, if you look at the significant double-digit pricing we had over the last several years, even now as commodities have stabilized, we're still positive on the pricing. Even though some of these indexes are going down, we're still getting, you know, low single-digit pricing growth across all our businesses. The way I would look at it is the value we continue to bring to our customers. We keep on driving price, and that price is sticky.
You guys might have talked about this in the past, but I think you mentioned like a 40-week lead time, which is great. Is there a delay in how those prices flow through, on, you know, contracts that were signed 40 weeks ago?
Absolutely. They're actually not fixed in price until they're engineered. If you think about it, the amount of material that's used, the amount of labor that's used, until that product is truly engineered pole by pole, the pricing's not fixed. At that point, once the drawing is signed off, that's when the price gets fixed. Figure midway in the cycle of 40 weeks is where pricing gets more fixed. You know, we know we buy certain constructions. We know there's certain types of steel we use regularly. When possible, we take forward hedges, either financial hedges and/or physical hedges.
To make sure that we're locking in as much of the margin as we can at that point. We're not trying to get rich, we're just trying to make sure we make the margin we thought we were gonna make.
Gotcha. The 5%-8%, I think it was, sales growth, how much of that is contemplated to be volume and how much price?
The majority of that is all organic growth, the 5%-8% is all organic growth, you could assume about 1% annually is pricing. Typically, the way I think about it is more pricing over inflation, where we could actually use our pricing power. It's like I mentioned, the value provided to our customers. Now, if inflation is gonna be higher, we've proven we've done that in the past, and we'll continue to drive pricing, which will offset the cost. For modeling purposes, you could assume about 1% is pricing.
Nathan.
Just getting you your stats.
Yeah.
Maybe just about a bit more broad question on capital deployment. It, you know, over the next five years after dividends, probably gonna be $1.5 billion+ of cash generated by the businesses, which will obviously significantly add to the earnings profile growth. I think, yeah, I don't think any of that's included in the EPS CAGRs that you guys have put out there. Whether it's buybacks or whether it's M&A, just, you know, focus areas for capital deployment, given that, you know, there's gonna be a whole lot of cash to deploy over that time period.
You wanna go, Aaron?
Yeah.
First of all, we maintain our discipline and balance capital allocation, right. Our first priority is to invest organically and actually generating that strong cash where it's a really good place to be in, actually puts pressure on us, on the business leaders to really find those opportunities to continue to reinvest in the business. Again, we have a very disciplined approach to investments as well, make sure we get the right returns. That's where we're gonna start. As I mentioned throughout the presentation, we do have already today in the pipeline some strong opportunities to invest. Right, we'll do that first, followed by acquisitions. That's really our priority to drive growth in the business, to the extent that we exhausted all the opportunities, we definitely continue to look at share repurchases and return capital to shareholders that way.
I guess the question is more focused on M&A, right? I mean, obviously you fund all the internal investments first because they're always the highest ROI investments and share repurchases, the thing left at the end of the, your choices to soak up whatever cash is left over. Maybe priorities for M&A, where you see the greatest areas over the next few years, what kinds of things you're focused on acquiring to accelerate growth in the businesses?
Sure. I'd say it's twofold. From the growth perspective, the areas like telecom, outside of the U.S. specifically, if we think of Europe or Australia, if you think of utility, some of these more nuanced products like concrete, and in being able to expand that concrete footprint because it is such a great margin accretive product for us, and it's growing to address a new market for us, which is distribution. If you look at the irrigation area that you talked a lot about aftermarket parts, while there's a lot of organic growth, there are areas of opportunity for inorganic growth, when we look at the parts market, because someone may be established in a region and many of our dealers already buy from them, so that's another area we'd wanna go after.
We're gonna put obviously an emphasis on technology, and so where we can dovetail in the technologies that are needed in supporting drones for infrastructure or more agronomy services with the Prospera area, those would be some areas we take a look at. You know, we're not afraid of big transactions either. The bigger we get and the more that you've seen this capability of this team, you know, going after synergies is more of a prominent capability than we used to have, the muscle we've been developing and building. That opens up other opportunities for us. We will stay disciplined to get to the return on asset capital, you have to buy disciplined. I do think strategics in this kind of higher interest rate environment have more opportunities than we've had, let's say, over the past five or six years.
I got one on, just a high level question on the transmission market. If we go anywhere near hitting the targets for the U.S. and global economy on electrification, and renewable energy and that kind of stuff, we're gonna be woefully underfunded to pay for all of this stuff. People don't like seeing their rates go up, don't like seeing their tax bills go up for this kind of stuff. I'm just wondering, just any thoughts you guys have on how this is going to get funded and how that could potentially positively impact Valmont's business if in fact we do fund this at a level to get anywhere near hitting the targets that we're laying out.
Aaron, you wanna start?
Well, first of all, you gotta hit the big, the big hitters construction. Anything product-wise you can do to make construction more efficient is critical, right? Because I mean, if you're talking about the whole value chain of putting in a transmission line, I mean, construction. That's a big part about it. If you're talking about foundations, how you're gonna direct embed, how all of these structures are going to be installed is critical. We're constantly talking to our partners about how to reduce that through product innovation to make it easier. One of the things we love about the concrete business is the fact of the matter is concrete is its own foundation, right? If you're already talking about what percentage of work goes into the foundation side, that's a big consideration.
secondly is the technology and O&M spend, right? O&M spend's a big deal for any of them because it's outside of that capital market, so anything that reduces O&M spend. When I talked about those inspections, I talked about the drones and the pieces with drones, that's gonna be a critical part of reduction as well. You're going to have to bring more technology into free up the maintenance capital that has to happen on these lines. That'll be another important part of bringing that forward. You know, there, you know, it's going to be an interesting market. You're right. I mean, it's still, even with the incentives that are out there to hit those mandates, you're putting a lot of solar fields out, you're putting a lot of...
The big bottleneck right now is the interconnects. You're gonna need on the regulatory side, FERC and the federal regulators are gonna need to do a much better job of the cross-state bureaucracies that have to talk to each other to get these large lines done. That is another critical piece that anything we can do to help that bureaucracy function faster and more efficiently will bring the costs down. It's a tremendous. It is difficult. That one's a big nut to crack. I agree, that is a, that's a part of it. You're really bringing a lot of things to bear.
You know, there's really interesting technologies that are coming out there, you know, whether it, you know, like just moving power lines that used to be done by helicopters, having drones replace those. There's a lot of new technology that'll bring these costs down. We're pretty excited about the future of this. We're working a lot with our utility partners to make sure that we can bring that construction cost down.
The positive I see out of this, Nathan, is that the cost pressure will force utilities and developers to adopt technology faster.
Absolutely.
Make those conversions which they may have been able to resist for a long time.
Right.
You know, we've always done it this way and no one got fired. That's gonna change. We have a couple examples of customers today, large customers that really run projects well. They look for every cost angle, and they come in not a penny over on their budgets that they promised to the PUC. That's the good thing for us 'cause as we're bringing these newer technology solutions, the diversity of materials in the space, the bundling of inspection services to lengthen warranties get factored into those rate cases. All of that puts us in a very strong position to capitalize on that cost pressure.
Yeah.
Chris Moore.
Thanks. Yeah, maybe just a couple of questions on operating margins. Maybe we could just get a little bit more granular in terms of how you're going from here to the 14%. Are there a couple of subsegments that you're really relying on? You talked a lot about international agriculture and more parts business. Telecom obviously always has higher margins. Are there a couple of things that you're kinda really leaning on to get to that 14% plus?
I think the overall answer is, it is broad-based. I mean, a lot of the initiatives we heard throughout the day will impact the entire portfolio. If it's anything that we're working on the operation side, anything on the pricing side, that all ties everything together. Some of our businesses that are incurring higher growth, like telecom as an example, right? That has a accretive margin to the overall company, actually. That helps to contribute. A lot of these initiatives we have around the Transform talk about technology, right? If you look at irrigation or agriculture, they have a head start on infrastructure. We'll start gaining some momentum there before we get on some of the infrastructure tech initiatives. We'll probably see improvement there.
I would say we're not counting on one specific area. I think a lot of the initiatives we put in place already, and unfortunately, we had COVID for the last 3 years, so we weren't able to see it, but we did see it in Q1 already. It jumped to 11.5%, which will continue to show that expansion. I'd say that overall, the entire portfolio will contribute to this improvement. Some of these transformation items, some of the businesses that are growing higher, like telecom as an example, will really help us achieve these goals.
Gotcha. Maybe just from a more, you know, kind of bigger picture perspective, you've got the 14% target, obviously trying to get the business less and less cyclical. Do you still think about it in terms of, you know, kinda the delta between the operating margin, you know, from a trough and a peak perspective? Is that, you know, kind of the part of the conversation that still goes on at this stage?
I'd say that overall, we will be over the next decade, we will be just less cyclical just due to the fact that we've seen all these tailwinds we have in infrastructure that will be, you know, for at least 10 years. Now as kind of Josh shared with us, we have a larger portion is international, a larger portion now is non-necessarily system parts. There's definitely the impact of this cycle, right? We-The North America ag business will cycle, and we did factor that in, and that does have an impact on the margins. It's just it's a profitable business. It is part of the conversation, but it's becoming less and less of the conversation as the other parts of the business are growing faster.
As we drive these improvements across the whole organization, the water level is higher. Now all our businesses are much more profitable. The profit profile is more similar than it has been in the past, so these cycles will have less of an impact on our operating margin percentage going forward.
Got it. Thanks.
Maybe time just for one more question, if there's anyone in the audience. Okay. I think I've got one more for Aaron then, and we don't have to. We can keep it brief. Aaron, you highlighted a new hybrid distribution pole offering during the presentation. Two-part question. Can you talk about what stage you're in with the rollout and the customer take-up of the new product, and also speak to the cost profile versus the cost profile of traditional wood distribution pole?
Okay, first of all, the rollout of the product is the principal engineering is done. We have different versions. I talked about a hybrid in a general sense. There's different versions, right? There's ones that's a lot of composites, there's a lot that's more concrete. It really depends on the need of the customer. All the principal engineering is done on the testing of these products as the distribution product, especially, and that's usually the hard part to make sure that the weight is the right weight and that the poles are in the right class position, that part is done. We've brought it out with a few lead customers right now that we're talking about.
The hybrid pole, we've done hybrid poles for a long time. You'll see hybrid poles on concrete and steel. It really depends on what classification you're talking about. We've done. The customer's already buying this. Customers are already buying our distribution pole. It's now bringing new hybrid materials to that distribution pole will be the next rollout. You'll see that in the next year. What's the cost relative to wood? Cost relative to wood, it is more expensive. It is more expensive than wood. When you're talking about having to rebuild a line over and over again when the wind kicks up, when you're talking about life cycle, if you put a wood pole, you put a wood pole in Hawaii, they don't last but a few years, two, three years.
They're constantly having to replace these things. Depending on the environment, you know, the, in general, the life cycle is twice as long if you're looking at a dry place. If you're in a, in a humid area or anywhere near the coast, these hybrids and these concrete poles will be a major product for these partners. Our Florida Southeast has already gone this way. When there's storm recovery, the amount of time it takes, it's not re-stringing wire. It's not the guys getting up there. It's getting the new pole infrastructure in place to safely re-string the wire. That is the long pole in the tent, so to speak. Every time, if you can make sure that pole is still there, the uptime is drastically increased.
We feel very good about where we are replacing that wood infrastructure. You know, one last comment, and then I'll leave it. Weight. The fleet, the new hybrid pole, what we love about it is the weight. If you have to replace a fleet of trucks in order to bring in a new product, it's not gonna work. I mean, the fleet of trucks are enormous. The great thing about our new hybrid product is the weight is under their normal fleet. When I'm swinging a wood pole that's maybe 2,000-3,000, it's the same weight, and so it uses the same equipment.
That's what took more time in engineering, is to get the weight right with the right strength so that they didn't have to replace fleet trucks. That's why that distribution market, which has traditionally been small for us when we played in steel, is now for us opening wide. We're looking at the right distribution models in the U.S. to move that forward. You know, internationally, the world's our oyster. We're, we're happy where we are on that distribution side.
Thank you, Aaron. All right. That wraps up our Q&A. That wraps up our event for the day. Thank you again, everyone that came and joined us here in person. Thank you for everyone that joined us on the webcast virtually. We hope you are as excited as we are about the ways that we are going to grow and transform Valmont over the next few years. As always, if anyone has any follow-up questions, you can reach myself, Renee or Jordan, or go to our website for our contact information. Thank you again, and please join me in thanking all the presenters this morning as well.